Previewing IBM's Q2 Earnings: Key Questions Remain For 2H'17

International Business Machines Corp. IBM will report its second-quarter earnings on July 18 after the close, but analysts are not expecting anything spectacular for investors.

Bernstein analyst Toni Sacconaghi previewed the report, and reiterated a Market-Perform rating and $150 price target. Shares closed on Thursday at $153.63.

The analyst expects IBM to meet or exceed the $2.75 consensus EPS estimate, but doubt revenues will beat the Street’s estimated $19.47 billion.

Related Link: IBM's Ginni Rometty On Warren Buffett: Investors Are Free To Speak For Themselves

Pushing Into The Second Half

Management had guided “well below” consensus EPS for Q2 and Sacconaghi expects EPS guidance of “at least” $13.80 for the year to remain unchanged.

“That said, we think IBM's EPS guidance for full year 2017 is aggressive,” said Sacconaghi in a note. It implies a significantly heavier second half, by a proportion greater than any time in the last 20 years.

The analyst doubts contributions from the mainframe cycle can overcome the implied ramping, and would require a boost from a tax event or one-time gain.

For Q3, Sacconaghi estimates $3.25 EPS compared to the Street’s $3.38 and would not be surprised if IBM follows suit.

Investor Advice

“Should [investors] begin to build positions now?” said Sacconaghi. “Our simple answer: No.”

Those already with a stake in the company though, should look out for five key metrics during the earnings call:

Date
ticker
name
Actual EPS
EPS Surprise
Actual Rev
Rev Surprise
Posted In: EarningsNewsPreviewsTrading IdeasBernsteinToni Sacconaghi
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