IBM (NYSE: IBM) has another chance to get its ailing stock on track this week when the company reports second-quarter earnings on July 18. Even after another slow start for IBM in 2018, analysts say the company might finally give investors a reason for optimism this quarter.
Consensus analyst estimates are calling for second-quarter earnings per share of $3.04. Wall Street analysts are also expecting IBM to report revenue of $19.9 billion, up 3.2 percent from a year ago.
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However, after years of disappointing numbers from IBM, GBH Insights head of technology research Daniel Ives says IBM’s high-growth Strategic Imperatives segment is finally starting to gain some traction. The segment, which includes strategic analytics and cloud strategic initiatives, makes up about half of IBM’s revenues and is growing at a double-digit pace.
“While it’s been an arduous, never-ending turnaround story at IBM with patience wearing thin among investors, the combination of massive cost cutting, a myriad of sales force changes, significant investments in AI, and focus on driving big data, cloud, and analytics sales is starting to resonate with customers based on our survey work and [is] helping the company slowly start to turn the corner,” Ives says.
Bank of America analyst Wamsi Mohan says he found a similar positive trend among commentary from chief investment officers during a recent survey of 300 global CIOs.
“IBM was the most widely used vendor and had the highest rating across each of the 11 evaluation criteria vs numerous IT services competitors,” Mohan says. “It was also one of the top IT services partners for digital initiatives.”
Ives says IBM’s overall second-quarter numbers will likely be mostly in line with consensus estimates, but investors should care much more about the strong performance of the Strategic Imperatives segment rather than weakness in the declining mainframe hardware business.
Bank of America is calling for second-quarter EPS of $3.03 for IBM, and full-year 2018 EPS of $13.79, slightly below consensus estimates of $13.82.
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“This quarter, it’s all about taking a positive step in the right direction, and we believe this will also be a good signal for broader enterprise tech spending trends that we saw in 2Q,” Ives says.
GBH Insights has an “attractive” rating and $180 price target for IBM. Bank of America has a “buy” rating and $200 target for IBM stock.
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Earnings Preview: What to Expect from IBM Stock originally appeared on usnews.com
