IBM Q4 Earnings Preview

International Business Machines Corp. IBM will report Q4 earnings after the market close Tuesday. Analysts expect revenue of $24.77 billion and EPS of $5.41.

Wells Fargo analyst Maynard Um recently commented that while “IBM is taking the right steps to transform by divesting low profit businesses and investing in newer growth areas, we believe the transition will take time. Until we get a better sense of when we can expect some of IBM's businesses to bottom (to allow for growth in newer businesses to start having a visibly positive benefit) it's difficult for us to get more constructive.”

Wells Fargo estimated revenue at $24.9 billion and EPS of $5.45. The firm maintained a Market Perform rating and valuation range of $155 to $170.

Credit Suisse analyst Kulbinder Garcha was concerned about “1) post a new deep dive on Services we see a weak order book and shrinking industry-wide deal sizes causing revenue headwinds and margin pressures; 2) following a thorough analysis of their cloud, we believe it may ultimately be margin dilutive for IBM even if the company drives revenue; 3) restructuring becoming less effective; and 4) our previous concerns over the significant rate of organic decline remain, despite a mainframe cycle, and even this could be optimistic.”

Credit Suisse estimated revenue at $24.6 billion and EPS of $5.37. The firm maintained an Underperform rating and $125 price target.

Over the past month the stock is down 1.29 percent. Heading into the earnings release, IBM traded at $156.27, down 0.55 percent.