Please ensure Javascript is enabled for purposes of website accessibility

What to Watch For in Thursday's IBM Earnings

By Dan Caplinger - Apr 17, 2013 at 12:33PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Dow's most important stock reports tomorrow.

On Thursday, IBM (IBM -0.91%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever surprises inevitably arise. That way, you'll be less likely to have an uninformed, knee-jerk reaction that turns out to be exactly the wrong move.

As the most influential stock in the Dow Jones Industrials (^DJI 0.03%), IBM gets plenty of attention not only from tech investors, but also by market watchers in general. As competition has increased, however, Big Blue has had to work increasingly hard to defend its turf and break new ground with its technology innovations. Let's take an early look at what's been happening with IBM over the past quarter and what we're likely to see in its quarterly report.

Stats on IBM

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$24.69 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will IBM leave investors feeling blue this quarter?
In recent months, analysts have gotten more excited about IBM's earnings prospects. They've only boosted their calls on first-quarter earnings by $0.02 per share, but they've added a more respectable $0.15 per share to their full-year 2013 calls on IBM's earnings. The stock has advanced in line with the broader market, rising a bit more than 10% since early January.

Even though it invented the PC, IBM has done an excellent job of avoiding the machine's fallout. By moving beyond hardware to incorporate higher-margin services including IT consulting, servers, and cloud computing, IBM avoided the trap that has snared other big tech companies as PC sales have declined.

But IBM has had to deal with increasing competition to its business model. Business software giant Oracle (ORCL 2.37%) has finally reached an impressive execution milestone in the strategy it began four years ago with its acquisition of Sun Microsystems: Oracle's new chips and server products managed to best Big Blue's offerings in independent benchmark testing. Smaller companies will increasingly find their own niche roles in the big-data space as well. For instance, CyrusOne (CONE), which got spun off from Cincinnati Bell recently, is seeking to make a name for itself in the data-storage infrastructure space. Despite its hefty debt load, CyrusOne has huge growth potential to capitalize on the growing need for data-storage centers, and it has the benefits of tax-favored real-estate investment trust status to boot.

IBM hasn't been coy about trying out new areas for potential growth. Last week, it announced a $1 billion initiative to invest in technology related to flash memory, the high-speed alternative to older technologies like hard disk drives. With the potential to reduce the time required for critical operations like banking transactions and telecommunications services, the initiative fits well with IBM's overall big-data mission.

In IBM's quarterly report, watch for how Big Blue responds to the news on Oracle's performance. With quality always vital for IBM, the company will need to show how it intends to find its way back to the top spot in short order.

Click here to add IBM to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$31,261.90 (0.03%) $8.77
International Business Machines Corporation Stock Quote
International Business Machines Corporation
$128.48 (-0.91%) $-1.18
Oracle Corporation Stock Quote
Oracle Corporation
$68.63 (2.37%) $1.59
CyrusOne Inc. Stock Quote
CyrusOne Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.