International Business Machines Corp. (IBM, Financial) disclosed on Tuesday that although first-quarter revenues increased 5% year over year, full-year earnings are expected to stay the same compared to the prior year’s earnings.
Brief summary of earnings
The New York-based information technology services company reported $2.45 in adjusted earnings per share, outperforming analyst expectations by approximately 3 cents. Despite this, pretax income declined 14% year over year primarily due to restructuring charges.
Chief financial officer Jim Kavanaugh mentioned that the company made “bold changes to reposition for the future” in the March Investor Briefing, including investments in cognitive solutions and cloud services. Cognitive Solutions revenues increased 2% driven on “broad-based growth” in both IBM’s on-prem analytics platforms and software-as-a-service offerings. Watson, the company’s artificial intelligence platform, maintained strong customer demand.
Company reiterates outlook from prior year
Although the company reported strong momentum during the quarter, IBM reiterated its full-year earnings guidance of $13.80 per share, approximately 3 cents lower than analyst expectations according to CNBC. Kavanaugh mentioned that despite strong growth in z14 and Power, Storage hardware declined primarily due to “an increasingly competitive environment and continued pricing pressures.”
IBM stock drops after beating estimates from CNBC.
Around 10 a.m. Wednesday, IBM shed approximately 6.79% from its previous close of $160.91.
GuruFocus ranked IBM’s profitability a modest 5 out of 10 primarily due to contracting operating margins and a negative five-year CAGR of sales. Other warning signs include a high dividend payout ratio and a share price near a 52-week high.
As discussed in a previous article, Jerome Dodson (Trades, Portfolio) eliminated his stake in IBM during the quarter.
Disclosure: No position in IBM.
