Highlights from IBM's Q1 report

IBM Common Stock (NYSE: IBM) lost more than 3% during Monday’s after-hours trading session after the Dow Jones Industrial Average component reported first-quarter results.

The Highlights

IBM reported EPS of $1.84 on sales of $17.57 billion versus expectations of $1.79 per share and $17.62 billion. Net income for the quarter fell 26% from last year to $1.18 billion, partly due to the spread of the coronavirus which impacted nearly every major corporation.

By segment, Cloud & Cognitive Software sales rose 5%, Systems rose 3%, Global Business Services were flat. Cloud revenue rose 19% to $5.4 billion and rose 13% during the past 12 months to $22 billion.

Net cash from operating activities was $4.5 billion ($2.1 billion excluding Global Financing receivables) while cash flow was $1.4 billion. Accounting for $1.4 billion which was returned to shareholders in the quarter, the company recorded $12.0 billion in cash on hand. Debt on the balance sheet was lower by $8.7 billion since the end of the second quarter 2019 at $22.3 billion.

Monday’s earnings report marks the final quarter under the leadership of Ginni Rometty. She stepped down on April 6 and was replaced with IBM veteran Arvind Krishna.

COVID-19 commentary

IBM remains “focused on helping our clients” adapt to the challenges posed by the COVID-19 pandemic, CEO Krishna said in the earnings report. The company strives to help enterprises shift their workloads to hybrid cloud and expand artificial intelligence capabilities to “help transform their operations.”

But due to the COVID-19 crisis, IBM is withdrawing its full-year 2020 outlook. The company will reevaluate its position when there is further clarity on any macroeconomic recovery at the end of the second quarter.

Early reaction: wait for the conference call for clues

IQ Capital CEO Keith Bliss was among the first experts to offer an early reaction to IBM’s Monday afternoon earnings report. Speaking on CNBC’s “Closing Bell,” he said the report is “supportive of equity markets” as sales and earnings “didn’t go all the way down.”

Perhaps more important, the first quarter was impacted by COVID-19 so investors should be paying close attention to the post earnings conference call. Management will be counted on to discuss its outlook for the second and third quarter.

“This is what everyone is waiting to hear and see what the company thinks when this crisis will end,” he said.