Market Overview

5 Things UBS Liked About IBM's Quarter

5 Things UBS Liked About IBM's Quarter
Related IBM
Is IBM A Value Trap?
Highlights From Q2's 13-F Season
Toronto Dominion Bank Buys Reynolds American Inc, International Business Machines Corp, ... (GuruFocus)

International Business Machines Corp. (NYSE: IBM) reported its 1Q results on April 18. UBS’ Steven Milunovich maintained a Neutral rating for the company, while raising the price target from $132 to $150. The analyst commented that although the quarter was tough, IBM seems to be “moving in right direction.”

IBM’s focus on becoming a leader in the new category of Cognitive Computing boosted the share price from $120 to $150. “We have seen green shoots over the last year, such as creating the strategic imperative units, shifting dollars from buyback to investments, and improved Glassdoor ratings,” analyst Steven Milunovich wrote.

5 Positives

Milunovich enumerated aspects of the quarter that were liked:

  1. IBM seemed to be making a lot of effort to transform, with strategic imperative revenue at 37 percent of the total, “with significant churn inside the 300,000 employee base as new replace old skills,” the analyst said.
  2. FCF rose to the high-end of the $11-$12bn range, with higher realization and the tax rebate.
  3. “Currency reduced revenue growth by only 2.6 points and is moving to IBM's benefit (especially the yen) though there still should be about an $0.85 EPS hit due to hedges rolling off,” Milunovich wrote.
  4. Charges created $500mn of cost savings for 2016
  5. IBM is building Watson as a platform

image credit: Kansir, Flickr

Latest Ratings for IBM

Aug 2017WedbushInitiates Coverage OnNeutral
Jul 2017ArgusMaintainsBuy
Jul 2017Standpoint ResearchUpgradesHoldBuy

View More Analyst Ratings for IBM
View the Latest Analyst Ratings

Posted-In: Steven Milunovich UBSAnalyst Color Price Target Reiteration Analyst Ratings


Related Articles (IBM)

View Comments and Join the Discussion!