IBM Corp. (IBM) bested the 1st quarter Zacks Consensus Estimates for both earnings and revenues. “Big Blue” brought in $2.41 per share with a top line of $24.6 billion, compared with the expected $2.30 per share and $24.0 billion in revenue.
As a result, IBM stock jumped about 2% immediately in after-market trading before selling off just as sharply. So what started after the bell as clearly an earnings surprise which has pleased the market, with Software sales rising 10% and Services up 6% in the quarter has turned into a bit of a head-scratcher at this point.
IBM said profits rose 10% year over year in the first quarter. Its revenues gained 8% from the year-ago quarter, though adjusting for foreign exchange rates takes that figure closer to 5%.
IBM also issued a statement from CFO Mark Loughridge, who said IBM enjoyed its best first quarter of constant currency revenue growth in ten years. IBM also raised its full-year earnings expectation from $13 per share to $13.15, above the $13.07 in the current Zacks Consensus.
It had been shaping up as another so-so quarter for the tech heavyweight. Concerns over productivity in Japan are casting a layer of uncertainty over the entire large-cap tech field in this 1st quarter earnings season. Two analysts had upwardly revised estimates for the quarter over the past month, but two had also lowered their revisions. Also, over the preceding four quarters IBM had posted an average positive earnings surprise of 1.93%. Not exactly enthralling.
However, with enterprise spending holding up fairly well, acquisitions in the Software business expected to enhance results going forward and a concerted effort to grow net margins, things appear to be looking up for IBM. And all this before mentioning that the company has taught a computer how to successfully play “Jeopardy.”
By Mark Vickery