IBM Tops by 2.5% - Analyst Blog

Unless of course you're talking about IBM (IBM), I guess...

After the bell Tuesday, the tech giant did what everyone knew they were going to do in the fourth quarter. With earnings per share of $4.18, IBM topped the Zacks Consensus Estimate by a dime, or approximately 2.5%. This marked another positive earnings surprise for the company. You have to go back more than 3 years to find a quarter where it failed to outperform; and even then the company was able to at least match expectations.

The result also marked a 16% improvement over last year's $3.59 per share.

Total revenues reached $29 billion, which was also ahead of the Zacks Consensus Estimate at around $28.3 billion. It was up 7% year over year.

Not only has IBM been able to surpass quarterly EPS and revenue expectations over the past several years, but it has also been providing encouraging outlooks through most of that period.

This time, IBM forecasting 2011 non-GAAP EPS of ‘at least' $13, compared to the Zacks Consensus Estimate of $12.61. According to the company, this puts it on track for its 2015 ‘road map' for at least $20 of operating EPS.

Despite the run-up to these numbers, earnings estimates for IBM have been rather tame of late. There are 23 total estimates for 2011, but there have only been 3 revisions in the past 30 days and 2 revisions in the past 7 days. Fortunately, all of those changes have been to the upside. Unfortunately, the Zacks Consensus Estimate has been unchanged in the last 2 months at $12.61 per share. Over the past 3 months, it is up only 2 cents.

Nevertheless, IBM has been able to hang on to a Zacks #2 Rank ('buy').

We remain optimistic for IBM's long-term growth, and appreciate its earnings growth potential, margin expansion and strong free cash flow, among many other factors. At the same time though, we are concerned about several factors, including European weakness, increasing competition and slower-than-expected IT spending growth. So we're sticking with a longer-term "Neutral" recommendation for now.

Given the size of IBM, and how well it is represented in the market, it takes a lot to move this company. It will be interesting to see in the coming days if this quarter's results were solid enough to set aside the concerns and pull this recommendation higher. We'll have a lot more specifics on this report with more analysis coming up...

In the meantime though, shares of IBM are up more than 2% in after hours trading.