IBM (NYSE: IBM) is scheduled to announce Q2 earnings results on Monday, July 19th, after market close.
The expectation from IBM to marginally beat the consensus estimates for revenues and earnings. The company has reported better than expected earnings figures in each of the last four quarters while revenue beat consensus in three of the last four quarters. In the past year, the company has increased its investment in R&D and capex and since October has acquired seven companies focused on hybrid cloud and AI. As the pace of vaccination increases and countries are opening up, we expect the momentum to continue in the second-quarter FY2021 results as well.
IBM Stock Price Forecast:
Morgan Stanley gave the stock price forecast of $152 with a high of $205 under a bull scenario and $78 under the worst-case scenario. The firm gave an “Equal-weight” rating on the technology company’s stock.
“We expect IBM to marginally beat the consensus estimates for revenues and earnings. The company has reported better than expected earnings figures in each of the last four quarters while revenue beat consensus in three of the last four quarters,” noted analysts at Trefis.
(1) Revenues expected to be just ahead of consensus estimates in Q2
Trefis estimates IBM’s fiscal Q2 2021 revenues to be around $17.57 billion, just above the $17.38 billion consensus estimate. IBM’s revenues for Q1 2020 were $17.73 billion, nearly flat y-o-y. Revenue from Cloud and Cognitive segment saw 4% growth for the quarter as organizations continue to push for digitization. We expect the momentum to continue in the second quarter of FY2021. Overall, we expect revenue of around $74.1 billion in FY2021.
(2) EPS likely to just beat the consensus estimates
IBM’s Q2 2021 earnings per share are expected to be $2.34 per Trefis analysis, just above the consensus estimate of $2.29. The company’s net income margin fell in 2020 due to the pandemic. The removal of lockdowns and steady growth in the rate of vaccination have contributed to a revival in demand across sectors. Altogether, the company is likely to report an EPS of around $12.66 in FY2021.
(3) Stock price estimate in line with the current market price
Going by IBM’s valuation, with an EPS estimate of around $12.66 and a P/E multiple of just above 11.1x in fiscal 2021, translates into a price of $140, which is in line with the current market price of around $140.
IBM Long (Buy)
ENTER AT: 140.89