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Can IBM Beat Consensus For FY 2019?

IBM (NYSE: IBM) is slated to release its Q4 and full-year 2019 results on January 21, 2020. Trefis details expectations from IBM in an interactive dashboard, parts of which are highlighted below. We believe that IBM’s Revenues will beat consensus but the Earnings will miss slightly. We expect IBM to report revenues of $80.3 billion (vs. consensus estimate of $77.1 billion), which would be 0.9% higher than the previous year. Earnings are likely to be around $12.26 (vs. consensus estimate of $12.80), much improved than $9.51 reported in 2018, due to a combination of higher revenues and better net income margin. We believe that better-than-expected revenues offset by lower than expected earnings for FY 2019 is unlikely to lead to any big movement in the company’s stock price once earnings are announced. In fact, our forecast indicates that IBM’s Valuation is $143 per share, which is slightly higher than its current market price of roughly $137.

A] Revenue Expected To Beat Consensus

  • Total revenues has slightly decreased from $79.9 billion in 2016 to $79.6 billion in 2018.
  • However, Trefis estimates IBM’s revenues to improve by 0.9% to $80.3 billion in 2019 from $79.6 billion in 2018.
  • Revenue from the 3 segments is expected to push the majority of the growth for 2019 with Technology and Cloud increasing the highest in absolute numbers.

A separate interactive dashboard for IBM provides an in-depth view of IBM’s revenue trend and segment-wise revenue performance, along with forecast for 2019 and 2020.

B] EPS To Be Lower Than Expected

  • IBM’s 2019 earnings per share is expected to be $12.26 per Trefis analysis, lower than the consensus estimate of $12.80 per share.
  • An increase in revenues as detailed above coupled with a reduction in total expenses along with lower share count will drive the EPS increase compared to 2018.
  • As we forecast IBM’s Revenues to improve and Expenses to decline in 2019 (0.9% vs -1.9%), this will result in an improvement in IBM’s Net Income Margin figure from 11% in 2018 to 13.5% in 2019.

C] Stock Price Estimate In Line With Market Price

  • A trailing P/E multiple of 11.7x looks appropriate for IBM’s stock, which is in line with the current implied P/E multiple of 11.9x.
  • As per Trefis, IBM’s 2019 revenue will be slightly higher than the market expectations, while earnings slightly lower compared to expectations. This forecast works out to a fair value of $143 for IBM’s stock, which is slightly higher to its current market price of around $137.

Additionally, you can input your estimates for IBM’s key metrics in our interactive dashboard for IBM’s pre-earnings, and see how that will affect the company’s stock price.

See all Trefis Price Estimates and Download Trefis Data here What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance TeamsProduct, R&D, and Marketing Teams

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