IBM Stock’s Q1 Results To Beat Consensus?

IBM (NYSE: IBM) is scheduled to report its fiscal Q1 2021 results on Monday, April 19. We expect IBM to beat the consensus estimates for revenues and earnings. The company has reported better than expected earnings figures in each of the last four quarters while revenue beat consensus in two of the last four quarters. In the past year the company has increased its investment in R&D and capex. Since October 2020, it has acquired seven companies focused on hybrid cloud and AI. We expect the same to drive the first-quarter FY2021 results as well.

Our forecast indicates that IBM’s valuation is around $137 per share, which is 5% above the current market price of around $131. Look at our interactive dashboard analysis on IBM’s pre-earnings: What To Expect in Q1? for more details. 

(1) Revenues expected to be ahead of consensus estimates in Q1

Trefis estimates IBM’s fiscal Q1 2021 revenues to be around $18.5 billion, 6% above the $17.4 billion consensus estimate. IBM’s revenues of $73.6 billion for the full year 2020 were below its 2019 figure, as the pandemic affected nearly all business segments. The Cloud and Cognitive segment saw some growth as organizations shifted toward digital transformation. We expect the momentum generated over last couple of quarters to continue in the first quarter of FY2021. Overall, we expect revenue of around $74.1 billion in FY2021. Our dashboard on IBM’s revenues offers more details on the company’s segments.

(2) EPS likely to beat the consensus estimates

IBM’s Q1 2021 earnings per share (EPS) is expected to be $1.82 per Trefis analysis, above the consensus estimate of $1.63. The company’s net income margin fell in 2020 due to the pandemic. This decreased the EPS figure from $10.56 to $6.23. The removal of lockdowns and steady growth in the rate of vaccination has contributed to a revival in demand across sectors. Altogether, the company is likely to report an EPS of around $12.66 in FY2021.

(3) Stock price estimate 5% above the current market price

Going by our IBM’s valuation, with an EPS estimate of around $12.66 and a P/E multiple of just above 10.8x in fiscal 2021, translates into a price of $137, which is 5% above the current market price of around $131.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

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