Why These 3 IBM Analysts Are Unimpressed With Q3 Beat And Raise

IBM IBM reported third-quarter adjusted earnings of $1.81 per share on revenues of $14.1 billion, beating Street expectations.

The Armonk, New York-based company also raised its revenue growth forecast for the full year.

Wedbush

Analyst Moshe Katri reiterated a Neutral rating and price target of $140.

IBM’s weaker-than-expected margins were offset by a revenue outperformance, Katri said in a note.

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The company witnessed a “noticeable services booking slowdown,” while most peers have had record bookings, and contraction of services margins, while most peers exhibited margin resilience, he added.

“Back-end loaded, FCF expectations, with YTD levels reaching the $4B, the company now needs to generate $6B in FCFs (Q4/CY22) in order to reach its $10B target,” the analyst further mentioned.

BMO Capital Markets

Analyst Keith Bachman maintained a Market Perform rating and price target of $148.

IBM reported strong quarterly results, led by Consulting, despite “formidable FX headwinds,” Bachman wrote in a note. “We thought PTI margins for the Q were a touch below expectations though the Dec Q guide appears achievable,” he added.

“However, IBM will face tough compares in CY23, and we think the macro could impact all areas of growth including Consulting,” the analyst further stated.

Credit Suisse

Analyst Shannon Cross reaffirmed an Outperform rating, while reducing the price target from $158 to $155.

“Although IBM noted some growing caution in conversations with European customers, all regions grew double-digits constant currency and demand was relatively consistent across sectors,” Cross said. “IBM is mostly exposed to large enterprises and is benefitting from a consistent demand environment that is not mimicking weaking consumer sentiment,” she added.

IBM Price Action: Shares of IBM had risen by 4.67% to $128.23 at the time of publication Thursday.