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Why IBM Stock Surged 6.2% in After-Hours Trading on January 22

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Jan. 24 2019, Published 8:34 a.m. ET

IBM’s revenue fell again

IBM (IBM) reported its earnings results for the fourth quarter of 2018 after the closing bell on January 22. Big Blue’s YoY (year-over-year) revenue was down for the second straight quarter, falling 3.5% YoY to $21.76 billion and beating analysts’ consensus estimate of $21.71 billion in the quarter.

In the third quarter, the company’s revenue fell 2.1% YoY.

IBM managed to grow for three straight quarters before that after nearly six years of quarterly falls on a YoY basis.

However, the markets were impressed by the company’s bottom line. IBM posted a profit of $1.95 billion. After adjusting for some one-time acquisition-related expenses and other items, its EPS came to $4.87, higher than Wall Street’s forecast of $4.82.

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IBM’s outlook for 2019 looks good

Investors also liked the company’s earnings guidance for 2019. The company expects EPS of at least $13.90 this year compared to $13.81 last year. The stock surged 9.1% in the first few trades on January 23.

IBM’s technology services and cloud platforms generated $8.9 billion in the quarter, down 3% YoY.

IBM generates 60% of its revenue from outside the United States. The strong US dollar in 2018 was a headwind for IBM and most other multinational companies. IBM’s CFO, James Kavanaugh, said that the strengthening dollar had cost the company $2 billion in revenue.

We’ll shed some light on the company’s growing cloud computing business in the next article.

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