Brian White Hikes IBM Revenue Forecast, Ups Target To $166

International Business Machines Corp. (NYSE: IBM) reported higher than expected Q1 results, while maintaining its EPS guidance for 2016.

Drexel Hamilton’s Brian J. White maintained a Buy rating on the company, while raising the price target from $160 to $166.

1Q Upside

“Although IBM delivered rare revenue upside, the reporting of new business segments adds another dimension of challenges for the market in analyzing IBM, while mixing in a tax benefit with a one-time charge offset obfuscates IBM's performance,” White mentioned.

The analyst believes the company is making progress on its transition, while the operating profit cycle is likely to have bottomed in 1Q16.

IBM reported its sales, revenue and EPS for Q1 above the consensus and the estimates. The company’s strategic imperatives grew 17 percent year-on-year, with cloud revenues growing 36 percent during the quarter.

“IBM highlighted a sequential improvement in U.S. sales in 1Q:16 but a decrease in Latin American driven by challenges in Brazil,” White stated.

Estimates Revised

IBM reaffirmed its 2016 pro forma EPS guidance of at least $13.50, with free cash flow now expected at the high end of its previous guidance range of $11-$12 billion.

The 2Q16 EPS and revenue estimates have been lowered from $3.33 to $2.91 and from $18.7 billion to $19.1 billion, respectively.

The revenue estimate for 2016 has been raised from $75.4 billion to $77.1 billion.