Technology company International Business Machines Corp. (IBM, Financial) reported fourth-quarter and full-year 2017 earnings after the closing bell on Thursday, recording its first quarter of revenue growth in almost six years.
The Armonk, New York-based company posted adjusted earnings per share of $5.18, topping Thomas Reuters’ estimates of $5.17. Quarterly revenue of $22.5 billion beat expectations of $22.06 billion and increased 4% from the prior-year quarter, ending the company’s prolonged 22-quarter streak of year-over-year revenue decline.
For fiscal 2017, the company posted earnings per share of $13.80 on $79.1 billion in revenue.
Despite the beat, shares fell more than 4.5% in after-hours trading on Thursday.
The decline in IBM’s revenue over the past decade is illustrated in the graph below.
As a result of the Tax Cuts and Jobs Act, IBM said it recorded a one-time charge of $5.5 billion. Including that charge, the company’s tax rate was 124% for the quarter and 49% for the year.
In an effort to return to revenue growth, IBM focused on several strategic initiatives in 2017, namely analytics, cloud, mobile and security. The company’s efforts may be starting to pay off as these initiatives delivered $11.1 billion in revenue in the fourth quarter, representing 46% of its total revenue, according to IBM Chairman, President and CEO Ginni Rometty.
"During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business,” she said.
During a conference call with analysts, the company said it expects earnings per share of at least $13.80 for full fiscal 2018.
James Kavanaugh, the company’s new senior vice president and chief financial officer, provided a glimpse into what IBM hopes to achieve over the next year.
"2018 will be all about reinforcing IBM's leadership position in key high-value segments of the IT industry, including cloud, AI, security and blockchain," he said.
With a market cap of $150.95 billion, IBM was trading more than 3% lower on Friday morning at around $162.79 per share. GuruFocus estimates the stock has gained 6% so far this year. In 2017, it lost approximately 7%.
Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio), who is IBM’s largest shareholder, has been gradually reducing his position over the past year. He currently holds a little over 37 million shares, which represents approximately 4% of the company’s outstanding shares.
Disclosure: I do not own any stocks mentioned.
