IBM (NYSE: IBM) just delivered a nice "beat and raise." First-quarter EPS of $2.41 grew 21% and beat the consensus estimate of $2.30. Management raised full-year expectations from "at least" $13.00 to "at least" $13.15. The CFO called the quarter "a great start on the road to our 2015 objective."

The 2015 objective was discussed at a March investor day. IBM plans to grow EPS by a compounded annual rate of 11% or more through 2015. Management assumes:

  • Base revenue growth of 2% annually.
  • Total revenue growth of about 5% annually, helped by future acquisitions and four growth initiatives: cloud computing, growth markets (e.g., BRIC countries), business analytics, and smarter planet.
  • Annualized EPS growth of about 3% from productivity gains, 1% from a shift to higher value products and services, and about 4.5% from share repurchases.

How'd they do in the first quarter? They beat that plan:

  • Revenue grew 5% in constant currency, right on plan. It was up 12% in growth markets, 20% in business analytics, and 20% in smarter planet. In cloud computing, it grew five times and is on track to double in 2011.
  • EPS grew 5.5% from productivity gains and a shift to higher value products and services, ahead of plan.
  • EPS grew about 7.5% from share repurchases, ahead of plan.

With the economy still muddling along -- and no end to the muddling in sight -- there's a lot to be said for growing EPS by expanding margins.

Public sector demand was weak, similar to what Cisco (Nasdaq: CSCO), Dell (Nasdaq: DELL), and Computer Sciences (NYSE: CSC) are experiencing. The transactional services business also disappointed, in keeping with Hewlett-Packard's (NYSE: HPQ) latest quarter but in contrast to improvements at Accenture (NYSE: ACN).

On a more positive note, IBM believes it captured almost all the Unix server industry's 8% growth. During the quarter, it had 210 competitive displacements worth more than $200 million, with roughly 60% of those from Oracle's (Nasdaq: ORCL) Sun accounts and 30% from HP accounts.  

Foolish takeaway
IBM laid out a 2010 plan in 2007 and beat it. It's already ahead on its 2015 plan. The company has delivered 33 consecutive quarters of year-over-year EPS growth. (Yes, right through the financial crisis.) It should grow EPS by at least 11% annually through 2015 and yields 1.6%. At a P/E of only 14.3 times, the stock appears attractive.  

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Fool contributor Cindy Johnson does not currently own shares of any stock in this story. Accenture is a Motley Fool Inside Value selection. The Fool has created a bull call spread position on Cisco Systems. The Fool owns shares of International Business Machines and Oracle. Alpha Newsletter Account, LLC owns shares of Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.