Monday, January 17, 2011

IBM Corp. (NYSE: IBM): Q4 Earnings Preview 2010

International Business Machines Corp. (NYSE: IBM ), the world's largest computer-services provider, is scheduled to release fourth-quarter earnings after the closing bell on Tuesday, January 18, 2011. Analysts, on average, expect the company to report earnings of $4.08 per share on revenue of $28.27 billion. In the year ago quarter, the company reported earnings of $3.59 per share on revenue of $27.23 billion.

International Business Machines Corporation, often considered a technology bellwether, develops and manufactures information technology products and services worldwide. Its Global Technology Services segment offers IT infrastructure and business process services, such as strategic outsourcing, integrated technology, business transformation outsourcing, and maintenance. The company dominates mainframe and server market.

In the preceding third quarter, the Armonk, New York-based company's net income was $3.6 billion, or $2.82 a share, from $3.2 billion, or $2.40 a share, in the year-ago period. Excluding non-operating pension charges and acquisition-related charges, operating net earnings would have been $3.63 billion or $2.85 per share for the quarter.Revenue grew 3% to $24.3 billion. Analysts, on average, expected the company to report earnings of $2.75 per share on revenue of $24.12 billion. The third quarter's profitability was fueled by margin expansion due to a shift to the higher-margin software business, increased sales in emerging and growth markets and higher development in the hardware, software and services businesses.

At its last earnings call in October, IBM boosted its fiscal 2010 earnings outlook. The company said that it now expects fiscal 2010 earnings to be at least $11.40 per share. Previously the company anticipated earnings of at least $11.25 per share.

When it comes to earnings per share, the company has met its 2010 goal of $10, a year ahead of schedule. It's goal for 2015 is to reach $20 of earnings per share. The company’s projections for 2015 assume about 5 percent in annual sales growth. IBM plans to save $8 billion through productivity gains by 2015, while free cash flow should reach $100 billion over that span. The company plans to give 70 percent of the cash flow to shareholders.

Acquisitions are a key part of IBM's growth strategy. The company has been investing in acquisitions to build its skills and technology in support of growth initiatives such as business analytics, and cloud computing. Early in 2010, Chief Executive Officer Sam Palmisano said that he plans to spend $20 billion on acquisitions in the next five years.

IBM is poised to benefit from the growth in corporate spending on information technology. Global spending on information technology is expected to grow 2.4% in 2010 to $2.4 trillion and 3.1% in 2011, according to research firm Gartner. 

The company has consistently rewarded investors with share buybacks and dividends. Late in October, IBM's board of directors approved a plan to buy back $10 billion worth of the technology giant's stock. This amount is in addition to approximately $2.3 billion remaining at the end of September 2010 from a prior authorization. With this new authorization, IBM will have approximately $12.3 billion for its stock repurchase program.The company said it also expects to seek additional stock buyback authorization at the IBM board's April 2011 meeting.  IBM has made more than 100 purchases in the past decade. The board also declared a regular quarterly cash dividend of $0.65 per common share.

In terms of stock performance, IBM shares have gained nearly 13 percent over the past year.

Full Disclosure: None.
Related Posts with Thumbnails

Wikinvest Wire