Monday, April 23, 2012

IBM Earnings Take Annual Q1 Dip, Raises Outlook

IBM reported Q1 2012 financial results on Tuesday, April 17.

IBM survived the annual Q1 headwind and a significant drop in earnings per share QoQ of -44% to $2.61 GAAP. The YoY increase was +13%. CFO Mark Loughridge stated growth will be skewed towards the second half of 2012. IBM raised guidance on the full-year 2012 GAAP EPS to $14.27+ from $14.16+. The Non-GAAP outlook was increased to $15.00+ from $14.85+.

IBM posted a record full-year 2011 GAAP earnings per share of $13.06. That's a +9.26% annual EPS increase projected for 2012. Later quarters should reflect an improving financial performance.

New CEO Ginni Rometty will have to wait until later in 2012 to top the stellar Q4 2011 financial results. Total assets dipped to $115.35 billion and continues behind #1 Apple and #2 HP but ahead of #4 Microsoft. These are the exclusive members of the Big Tech $100 Billion Club.

IBM has a large, embedded product financing operation which results in a lower return on assets (+14.13%) than other technology companies. Financial position continues as acceptable, with adequate capital, moderate debt, and sufficient liquidity.

IBM Income Statement Q1 2012 IBM reported total revenues of $24.67 billion, net income of $3.07 billion, and earnings per share of $2.61. From the prior quarter Q4 2011, these were -16%, -44%, and -44%, respectively. From the prior year Q1 2011, these were +0.27%, +7%, and +13%, respectively. Gross margin, operating margin, and net margin dipped QoQ but increased YoY. Cash flow from operations of $3.65 also decreased QoQ but increased YoY. The operating expense ratio of 29.31% increased QoQ and YoY to an 8-quarter high on lower revenues but stable expenses.

IBM Balance Sheet Q1 2012 Total assets dipped from the prior quarter record of $116.43 billion to $115.35 billion. The capital to assets ratio rebounded to 18.02% from a 9-quarter low of 17.38%. The current ratio of 42.35% is about the historical average. The return on assets of +14.13% is a multi-year high. Total debt at 27.79% of total assets is above the historical average.

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