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Why IBM Stock Rose 5% Today

By Anders Bylund - Jan 22, 2020 at 3:35PM

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Big Blue's fourth-quarter results led to a classic beat-and-raise report.

What happened

Shares of International Business Machines (IBM 0.19%) jumped as much as 4.8% on Wednesday, following an impressive fourth-quarter earnings report on Tuesday night. By 3 p.m. EST, Big Blue's stock had cooled down somewhat to a 3% gain.

So what

IBM's fourth-quarter sales held steady year over year at $21.8 billion and adjusted earnings fell 3% to $4.71 per share. Your average analyst would have settled for earnings of roughly $4.68 per share on revenue near $21.6 billion. The company also set its full-year profit guidance slightly ahead of current Wall Street projections.

IBM's corporate logo in white and blue stripes.

Image source: IBM.

Now what

The computing systems and IT consulting giant expects a return to revenue growth and solid bottom-line earnings in 2020, reaping the cloud computing rewards of buying open-source software veteran Red Hat for $33 billion last summer. It will take a couple of years to pay down the additional debt that the deal required, but the buyout is already paying dividends in the form of a cool $1 billion of additional revenue per quarter and a positive contribution to IBM's free cash flow.

Today's significant price increase makes sense in light of this solid earnings report and optimistic guidance targets.

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