International Business Machines Corp (IBMStock Charts and Research Links: 127.18, 0.13) is scheduled to report its financial results on Thursday, October 15. In the last four quarters, the company's actual earnings exceeded the market's consensus forecast.
Analysts estimates for the quarter ending September 2009 (Q3) range from a low of $2.3 to a high of $2.45, with a consensus of $2.379.
For the fiscal quarter ending September 2009, the consensus EPS forecast has increased over the past week from $2.374 to $2.379 (0.21%) and increased over the past month from $2.371 to $2.379 (0.34%). Of the 21 analysts making quarterly forecasts, 3 raised and none lowered their forecast.
In the third quarter of 2008, IBMStock Charts and Research Links: 127.18, 0.13 reported lower revenues on a sequential basis. I am positive that in the third quarter of 2009, the company would report sequential earnings increase. IBM has improved its gross profit margin in 19 of the last 20 quarters. That shows it has aggressively controlled costs while finding ways to squeeze more money from its products. Positive gross margin trend is likely to have continued in the September 2009 quarter as well.
IBM transformed its mix of products, services, skills and technologies exiting commoditizing businesses like PCs and hard disk drives, and making more than 100 strategic acquisitions this decade. The focus on internal R&D has also increased - of the more than 4,000 U.S. patents IBMStock Charts and Research Links: 127.18, 0.13 received in 2008 (the 16th straight year of patent leadership), more than 70% were for software and services. IBM's portfolio today is built around networked, modularized and embedded technologies, such as service-oriented architecture (SOA), virtualization, business intelligence and analytics. As a result, the company is well positioned to build the kinds of IT infrastructures and solutions that will be of the highest value to its clients. Moreover IBM is still reaping benefits from its legacy investments in mainframes. Market-researcher IDC estimated that in 2008 mainframes accounted for 9.9% of the world-wide $53 billion server market.
In the third quarter of 2009, IBM acquired Ounce Labs Inc, (a Waltham- based developer of enterprise security assurance software), and agreed to acquire greed to acquire RedPill Solutions Pte Ltd, a Singapore-based provider of consulting services. According to a recent survey of over 400 software developers published in October, IBM is the company that developers think of as having the best ability to execute in a private cloud. IBM was thought to be able to provide the most secure cloud environment and was also rated high in reliability and ability to execute – qualities essential to large enterprises considering private or hybrid clouds.
The estimated services backlog at June 30 was $132 billion at actual rates compared with $126 billion at March 31, 2009. Net on net, the backlog should have increased in Q3-2009 as well.
For the fiscal year ending December 2009, the consensus EPS forecast has increased over the past week from $9.763 to $9.766 (0.03%) and increased over the past month from $9.761 to $9.766 (0.05%). Of the 23 analysts making yearly forecasts, 3 raised and none lowered their forecast.
Currently, the stock is trading at $127.04, compared to the 52 week range of $69.5-$127.1. The stock seems to be appropriately valued at the current levels.
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