Monday, July 23, 2012

IBM Earnings Review: Performance Rebounds, Raises Guidance

IBM reported QE June 2012 financial results on Wednesday, July 18

The good is both net income and earnings per share showed growth QoQ and YoY. Some uncertainty is created by total revenues decreasing -3% YoY, even though there was a +5% QoQ increase. Total revenues growth YoY has been downtrending since QE June 2011 (see chart below).

CFO Mark Loughridge stated growth will be skewed towards the second half of 2012. Hopefully more traction and growth will be shown next quarter and the acceleration will become evident. New CEO Ginni Rometty will have to wait until later in 2012 to attempt to top the stellar Q4 2011 financial results. We await.

IBM raised guidance on the full-year 2012 GAAP EPS to $14.40+ from $14.27+ (earlier was $14.16+). The full-year 2012 Non-GAAP outlook was increased to $15.10+ from $15.00+ (earlier was $14.85+).

IBM has a large, embedded product financing operation which results in a lower return on assets (+14%) than other technology companies. Financial position has been acceptable, with adequate capital, moderate debt, and sufficient liquidity. Total assets place IBM in the Big Tech $100 Billion Assets Club along with Apple, HP, and Microsoft.

Metric, QoQ Change, YoY Change
Total Assets: $113.83 billion, -1%, 0%
Total Revenues: $25.78 billion, +5%, -3%
Net Income: $3.89 billion, +27%, +6%
Earnings per Share: $3.38, +30%, +13%

"In the second quarter, we delivered strong profit, earnings per share and free cash flow growth. This performance reflects continued strength in our growth initiatives and investments in higher value opportunities," said Ginni Rometty, IBM president and chief executive officer. "These are fundamental elements of our long-term business model. "Looking ahead, we are well positioned to deliver greater value to a wider range of clients and to our shareholders. Given our performance in the first half and our outlook for the second half, we are raising our full-year operating earnings per share expectations to at least $15.10."


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