IBM’s Stock To Marginally Beat Consensus For Q2

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IBM: International Business Machines logo
IBM
International Business Machines

IBM (NYSE: IBM) is scheduled to report its fiscal Q2 2021 results on Monday, July 19. We expect IBM to marginally 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 three of the last four quarters. In the past year the company has increased its investment in R&D and capex and since October has acquired seven companies focused on hybrid cloud and AI. As the pace of vaccination increases and countries are opening up, we expect the momentum to continue in the second-quarter FY2021 results as well.

Our forecast indicates that IBM’s valuation is around $140 per share, which is in line with the current market price of $140. Look at our interactive dashboard analysis on IBM’s pre-earnings: What To Expect in Q2? for more details. 

(1) Revenues expected to be just ahead of consensus estimates in Q2

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Trefis estimates IBM’s fiscal Q2 2021 revenues to be around $17.57 billion, just above the $17.38 billion consensus estimate. IBM’s revenues for Q1 2020 were $17.73 billion, nearly flat y-o-y. Revenue from Cloud and Cognitive segment saw 4% growth for the quarter as organizations continue to push for digitization. We expect the momentum to continue in the second 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 just beat the consensus estimates

IBM’s Q2 2021 earnings per share (EPS) is expected to be $2.34 per Trefis analysis, just above the consensus estimate of $2.29. The company’s net income margin fell in 2020 due to the pandemic. 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 in line with 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 11.1x in fiscal 2021, translates into a price of $140, which is in line with the current market price of around $140.

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

Looking for reasonably valued software stocks with big room to grow? Check out our theme on Mid-Cap SaaS Stocks.

See all Trefis Price Estimates and Download Trefis Data here

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