IBM Q1 results suggest it’s a ‘bastion of stability’

on Apr 19, 2023
  • IBM reports better-than-expected earnings for its fiscal Q1.
  • Evercore's Amit Daryanani discussed its earnings print on CNBC.
  • IBM stock is currently down about 10% versus the start of 2023.

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IBM (NYSE: IBM), on Wednesday, reported better-than-expected earnings for its first financial quarter. Its shares still gained only slightly in extended trading.

Analyst reacts to IBM’s Q1 earnings report

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Investors are perhaps focusing more on a marginal miss in terms of revenue.

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The tech behemoth also talked of some weakness in its consulting business. Still, Amit Daryanani of Evercore ISI said on CNBC’s “Closing Bell: Overtime”:

These numbers validate IBM being this bastion of stability when there’s macro turmoil. We were surprised by double-digit constant currency growth they had in Red Hat.

His $150 price target on IBM stock suggests an 18% upside from here.

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IBM’s guidance for the future

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On the plus side, IBM forecasts between 3.0% and 5.0% growth in its revenue this year. In comparison, analysts were at 3.6%.

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The Armonk-headquartered firm sees $10.5 billion in free cash flow for the full year – up from $9.3 billion in 2022. Daryanani added:

The fact that they’re comfortable sticking with $10.5 billion free cash flow is fairly impressive – all the more impressive given the macro and IT spent worries.

CEO Arvind Krishna also confirmed today that the company isn’t developing consumer-facing AI products. For the year, IBM stock is down about 10% at writing.

IBM Q1 financial highlights

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  • Net income printed at $927 million versus year-ago $733 million
  • Per-share earnings also climbed from 82 cents to $1.02
  • Adjusted EPS came in at $1.36 as per the earnings press release
  • Revenue went up only 0.4% year-over-year to $14.25 billion
  • FactSet consensus was $1.26 a share on $14.35 billion revenue

Revenue from infrastructure, consulting, and software businesses climbed 3.7%, 2.8%, and 2.6%, respectively – all roughly in line with Street expectations.

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