International Business Machines (IBM – Free Report) is scheduled to report first-quarter 2018 results on Apr 17 after market close. Being the world’s largest computer-services provider, it is worth taking a look at its fundamentals ahead of results.
IBM has gained 3.1% so far this year but slightly lagged the industry’s average growth of 3.5%. The upside might be limited as IBM is less likely to beat the earnings estimate but has attractive fundamentals.
Inside Our Methodology
IBM has a Zacks Rank #3 (Hold) and an Earnings ESP of -1.83%, indicating lower chances of its beating estimates this quarter. According to our surprise prediction methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP may lead to an earnings beat. A Zacks Rank #4 or 5 (Sell rated) is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The earnings track is respectable, with an average earnings surprise of 2.83% for the last four quarters. The Q1 Zacks Consensus Estimate reflects modest earnings growth of 0.42% from the year-ago quarter. IBM also projects year-over-year revenue growth of 3.06%, signaling another quarter of revenue growth. Additionally, the stock saw positive earnings estimate revision of 26 cents over the past 90 days, for the first quarter. Though IBM has a Growth and Momentum Style Score of C each, it boasts a top Value Style Score of A and belongs to a top-ranked Zacks industry (top 17%).
According to the analysts compiled by Zacks, IBM has an average target price of $176.23 with 29% of the analysts having a Strong Buy or a Buy rating and 65% having a Hold rating ahead of earnings. This represents more than 11% upside form the current price.
What to Watch?
Investors are keen to watch the second consecutive quarter of revenue growth. Strategic areas like cloud computing, security software, data analytics and artificial intelligence as well as the new wave of blockchain technology are acting as a significant tailwinds to the company’s top line.