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What to Watch for in IBM’s Upcoming 4Q16 Results

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What to Watch for in IBM’s Upcoming 4Q16 Results PART 1 OF 7

Will IBM Break Its Negative Revenue Trend in 4Q16?

4Q16 expectations

International Business Machines (IBM) is scheduled to release its 4Q16 and 2016 results on January 17, 2017. Its technology peers VMWare (VMW) and Microsoft (MSFT) will report their earnings on January 24 and 26, respectively.

Estimize, a financial estimates platform, expects IBM to report 4Q16 revenue of ~$21.7 billion. It expects non-GAAP (generally accepted accounting principles) EPS (earnings per share) of $4.91.
Will IBM Break Its Negative Revenue Trend in 4Q16?

18th quarter of no revenue growth

The above graph shows IBM’s quarterly revenue performances over the last couple of years. In 3Q16, it reported revenue of ~$19.2 billion and non-GAAP EPS of $3.29. On a year-over-year basis, IBM’s revenue fell 0.3% in 3Q16, making it the company’s 18th consecutive quarter of no revenue growth.

Despite the falls in its revenue, IBM’s 3Q16 revenue and EPS beat analysts’ consensus expectations by $200 million and $0.06, respectively.

With its 4Q16 results about to be announced, IBM is under severe pressure to report revenue growth. In 2016, IBM continued to pursue its strategy of acquisitions and partnerships to post growth in the cloud space. However, looking at this growth, it’s apparent the company was unable to do so.

The market sentiment surrounding IBM’s stock has improved. Recently, IBM was picked as one of 2017’s “Dogs of the Dow.” Morgan Stanley (MS) analyst Katy Huberty believes that the market has underappreciated IBM’s growth potential and its initiatives toward the analytics and cloud businesses.

The cloud dominates the enterprise software space, and it’s growing rapidly. However, despite several initiatives, IBM and Oracle (ORCL) are finding it difficult to report growth. On the other hand, Salesforce.com (CRM) continues to post double-digit growth.

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