IBM Reports Earnings on Monday. What to Expect.

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IBM reports first-quarter earnings Monday after the market close.

Andreas Arnold/Bloomberg


will kick off the first-quarter tech earnings season when it reports financial results after the close of trading on Monday. For investors, the focus likely will be less on granular results and more on any new details the company provides on the planned spinoff of its managed information services business, which it recently christened Kyndryl. IBM expects to complete the spin later this year.

For the quarter, Wall Street sees IBM (ticker: IBM) reporting revenue of $17.4 billion, with non-GAAP profits of $1.63 a share. That compares to revenue of $17.6 billion and a non-GAAP profit of $1.84 a share in the year-ago quarter. IBM said in January that it expects currency to boost its first-quarter revenue growth by 3 to 4 percentage points.

IBM does not provide quarterly guidance. The company previously said 2021 revenue should be up from 2020. IBM also said it expects adjusted cash flow for the year of between $11 billion and $12 billion.

To date, IBM has not provided clear financial information on how it will divide its business between IBM and Kyndryl. The hope is that the skinnier version of IBM after the spin can return to reliable top-line growth.

IBM shares on Friday were up about 1%, to $134.

UBS analyst David Vogt, who has a $122 target and the equivalent of a Hold rating on the stock, expects this quarter to be a nonevent, with investors zeroed in on the details on the spin. He notes that while estimates are little changed over the past few months, IBM shares have benefited from a rotation into value plays—the stock is up about 13% since early February. Vogt said investors have little interest in the quarter and are focused on the ability of the skinnier IBM to boost revenue in the mid-single-digit range in 2022 and beyond. 

Evercore ISI analyst
Amit Daryanani,
who has the equivalent of a Hold rating and $140 target on shares, writes on Friday that he thinks first-quarter results will match Street estimates. But he adds that IBM “should see benefits from an incrementally more positive IT spending background” that has emerged over the past 90 days. “We think [the] stock has strong support at current levels given a ~5% dividend yield, though the longer focus will remain on the upcoming Kyndryl spin and ability to drive mid single-digit growth consistently post spin,” he writes.

Stifel’s David Grossman is more bullish. He has a Buy rating and $147 target price. Grossman writes in a research note that the first quarter is seasonally weak for IBM and management “has already telegraphed” that the first half will be challenging. He says investors will be looking for signs of improvement in both software and professional services, “which have been underperforming peers.”

Grossman adds: “While we do not envision a significant sentiment shift following this report,IBM offers income sensitive value-oriented investors a unique opportunity given potential catalysts.”

Write to Eric J. Savitz at [email protected]

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