What’s Expected for IBM in Fiscal Q2 2018



Earnings guidance

IBM (IBM), set to release its fiscal Q2 2018 results on July 18, expects fiscal 2018 non-GAAP EPS of $13.80, of which almost 40% is expected to be achieved in fiscal H1 2018. In Q1 2018, the company had non-GAAP EPS of $2.45. Therefore, going by the company’s first-half EPS guidance, it expects Q2 2018 EPS of ~$3.07.

Meanwhile, analysts expect IBM to see EPS $3.05. The graph above shows IBM’s EPS over the last five quarters, during which they have beaten analysts’ estimates easily and grown at a compound annual rate of 0.7%. In fiscal Q1 2018, its EPS rose year-over-year to $2.45 from $2.38.

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EPS tailwinds and headwinds

Ongoing digitalization trends have helped IBM secure multiple deals globally, and its z14 mainframe is seeing high adoption, which may grow the company’s EPS. Furthermore, IBM’s dominance in the AI and blockchain spaces may help it win better deals than IT peers Microsoft (MSFT), Oracle (ORCL), and Accenture (ACN), and support its top and bottom lines. US tax reform may also boost the company’s bottom line. However, higher R&D (research and development) and selling and marketing costs may continue to act as headwinds for the company’s EPS in Q2 2018.


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