On Tuesday, a day where the U.S. stock market declined on economic slowdown fears, International Business Machines Corp. (IBM, Financial) increased as much as 7% in after-hours trading as revenues and earnings for the quarter ending December 2018 outperformed analyst expectations.
The Armonk, New York-based information technology services company reported operating earnings of $4.87 per share on $21.76 billion in revenue. Earnings outperformed the consensus estimate by approximately 5 cents per share while revenues outperformed by approximately $50 million.
Full-year revenues increase 1%, driven by strong growth in software and services
Chief Financial Officer Jim Kavanaugh said the company expanded gross margin and pretax margin through strong growth in revenues, operating profit and earnings per share. Kavanaugh said during the earnings call clients like Vodafone Group PLC (VOD, Financial) and BNP Paribas (XPAR:BNP, Financial) “continue to drive business to the cloud” and turning big data into competitive advantages. CEO Ginni Rometty added such companies are turning into the IBM Cloud to transform their business and drive innovation.
Kavanaugh said IBM’s revenue stemmed from strong growth in software and services, with Cognitive Solutions revenues increasing 2% year over year and Global Business Services revenues increasing 6% year over year, driven by strong analytics and artificial intelligence offerings. The growth in Cognitive Solutions revenues was driven primarily by innovation to clients and higher scale in products, which led to “strong transaction processing growth.”
The CFO also said higher growth in all business areas within Global Business Services led to revenues of $4.3 billion, up 6% from the prior year. Full-year Strategic Imperatives revenues of $19 billion included a $12 billion annual revenue run rate, up 21% from the prior year.
Stock rises in after-hours trading amid economic slowdown fears
Shares of IBM rose as much as 7% in after-market trading on a day where the Dow Jones industrial average sank 300 points on economic slowdown fears stemming from China’s 6.6% gross domestic product growth in 2018, its “slowest growth in 28 years” according to CNBC columnist Fred Imbert.
Gurus with large positions in IBM include Pioneer Investments (Trades, Portfolio) and Barrow, Hanley, Mewhinney and Strauss.
Disclosure: No positions.
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