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Wells Fargo Maintains on IBM, Valuation Range of $175.00-185.00

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In a report published Wednesday, Wells Fargo analyst Maynard Um maintained Market Perform on International Business Machines (NYSE: IBM), with a valuation range of $175.00-185.00.

According to the report, Q4 revenues of $27.7B were below analyst's $28.5B estimate with shortfall in all business segments vs. their expectations, but primarily in the hardware business due to continued pressures in the emerging markets, particularly China.

“While non-GAAP EPS of $6.13 was better than our and consensus estimate of $6.00, the bulk of the upside was from lower taxes ($0.78 benefit) and lower operating expenses,” the report noted. “2014 EPS guidance of at least $18.00 is in line with our $18.02 estimate (Street: $18.03), but is likely to be driven mainly by cost cutting initiatives (expects to take an additional workforce rebalancing charge of about $1B in Q1). While we lower our 2014 revenue estimate to $98.6B from $101.0B, we maintain our EPS estimate of $18.02 to reflect potential benefits from cost savings. We introduce our FY2015 EPS estimate of $19.62.”

Some highlights from the report included:

-”Bottom line: IBM continues to face challenges in its businesses, particularly hardware segment, limiting revenue growth and while one-time non-operational items (taxes, share repurchases, etc.) have helped drive EPS growth, we believe these are unsustainable over a longer period of time.” -”We view IBM as a fairly defensive stock given its historical track record of meeting and exceeding guidance, return of solid cash flow in the form of share repurchases and dividends, recurring revenue streams, and given that, among its peers, it is furthest along in offering complete solutions.”

IBM closed Tuesday at $182.40 with shares trading down at 3.20 percent.

Latest Ratings for IBM

DateFirmActionFromTo
Jul 2014BarclaysMaintainsEqual-weight
Jul 2014UBSMaintainsNeutral
Apr 2014SarasinDowngradesBuyNeutral

View More Analyst Ratings for IBM
View the Latest Analyst Ratings

Posted-In: Maynard Um Wells FargoAnalyst Color Reiteration Analyst Ratings

 

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