Could IBM’s Negative Revenue Trend Come to a Halt in 2Q17?
Fiscal 2Q17 expectations
IBM (IBM) is scheduled to release its 2Q17 results on July 18, 2017, after the market closes. Peer Microsoft (MSFT) will report its earnings on July 20, 2017. Estimize, the financial estimates platform, expects IBM to report 2Q17 non-GAAP (generally accepted accounting principles) EPS (earnings per share) of ~$19.5 billion and $2.73, respectively.
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No revenue growth
The above graph shows that, in the last ten quarters, IBM has not once managed to meet or beat analysts’ expectations. In fiscal 1Q17, IBM reported revenue of ~$18.2 billion and non-GAAP EPS of $2.38. Through strict cost control, IBM managed to beat analysts’ EPS expectations by $0.03. However, its revenue missed expectations by $230 million. Fiscal 1Q17 marked the 20th consecutive quarter, or five years, of no revenue growth for IBM.
With its 2Q17 results around the corner, it goes without saying that IBM is under severe pressure to report revenue growth. Its strategy of acquisitions and partnerships to post growth has not provided the desired results.
However, IBM’s initiatives to boost its Strategic Imperatives haven’t gone unnoticed. Morgan Stanley (MS) analyst Katy Huberty continues to believe in IBM’s turnaround. She believes that the market has yet to appreciate IBM’s growth potential and its initiatives toward rapid growth in analytics and the cloud. However, Warren Buffett doesn’t seem to be so optimistic about IBM’s prospects, as was made evident by his sell-off of one-third of his stake. In early 2017, IBM was picked as one of 2017’s “Dogs of the Dow” by Cornerstone Macro.