The semi-annual tech earnings season kicks off Monday afternoon with results for the June quarter of
The consensus on Wall Street is that IBM (ticker: IBM) will report revenue of $18.3 billion, up about 3% from a year ago, with earnings of $2.29 per share. Like many tech companies this quarter, Big Blue’s results will benefit from low-base comparisons. Revenues fell 5.4% in the same quarter a year ago, while US gross domestic product fell 34%.
Sales for the September quarter are expected to be $17.6 billion, with earnings of $2.59 per share.
IBM’s business should benefit from an increase in corporate spending on hardware, software and services. The research agency Gartner this week expected information technology spending in 2021 will increase by 8.6%, a significant improvement from the 0.9% increase in 2020.
Meanwhile, The Street awaits the financial details of the impending spin-off of its managed information services company, now called Kyndyl. The company has said it will close the transaction before the end of the year.
In a research note previewing June’s quarterly results, Morgan Stanley analyst Katy Huberty wrote that she expects results for the quarter to be in line with Street’s estimates. She is optimistic about CEO Arvind Krishina‘s strategy to focus on sustainable growth, saying the stock is positioned for better performance in 2022.
A recent internal email outage at the company is unlikely to materially impact its results, Huberty said. She also sees a greater than expected benefit from exchange rate factors. She said she expects a currency-related increase in revenues of 5.1%, above the 3% management has told investors to expect.
Next year, Huberty said, IBM will enter a new mainframe cycle, noting that “stocks will historically outperform after spin trades.” She also noted that institutional ownership in IBM remains at an all-time low.
Huberty maintained an Equal Weight rating for the stock with a price target of $152.
Evercore ISI analyst Amit Daryanani also expects the results to be in line with expectations. He said the main focus on the post-profit call will be a recent flurry of management changes at the company, including the departure of President Jim Whitehurst. He told Barron’s in a recent interview that he wants to find a CEO role.
Turning to the quarter, Daryanani noted that other enterprise IT vendors have reported strong results, citing the latest figures from both Oracle and Accenture. The post-pandemic recovery should boost demand from markets such as retail and travel, he said, noting that IBM job openings saw large increases in May on both an annualized and sequential basis.
Daryanani held an In Line rating on the stock with a price target of $150.
On Friday, IBM shares fell about 0.8% to $139.38. The stock is up 15% so far.
Write to Eric J. Savitz at firstname.lastname@example.org