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International Business Machines Whiffs on Earnings

By Seth Jayson – Updated Apr 10, 2017 at 12:48PM

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Just the facts, Fool.

International Business Machines (NYSE: IBM) reported earnings on July 17. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended June 30 (Q2), International Business Machines missed slightly on revenues and whiffed on earnings per share.

Compared to the prior-year quarter, revenue dropped. Non-GAAP earnings per share increased. GAAP earnings per share dropped.

Gross margins expanded, operating margins shrank, net margins dropped.

Revenue details
International Business Machines booked revenue of $24.92 billion. The 21 analysts polled by S&P Capital IQ expected revenue of $25.33 billion on the same basis. GAAP reported sales were the same as the prior-year quarter's.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $3.91. The 19 earnings estimates compiled by S&P Capital IQ anticipated $3.78 per share. Non-GAAP EPS of $3.91 for Q2 were 11% higher than the prior-year quarter's $3.51 per share. GAAP EPS of $2.91 for Q2 were 13% lower than the prior-year quarter's $3.34 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 48.7%, 110 basis points better than the prior-year quarter. Operating margin was 16.7%, 390 basis points worse than the prior-year quarter. Net margin was 12.9%, 220 basis points worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $25.05 billion. On the bottom line, the average EPS estimate is $3.95.

Next year's average estimate for revenue is $103.32 billion. The average EPS estimate is $16.64.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 4,387 members out of 4,824 rating the stock outperform, and 437 members rating it underperform. Among 1,080 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 1,024 give International Business Machines a green thumbs-up, and 56 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on International Business Machines is outperform, with an average price target of $220.95.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool recommends the following options: long January 2014 $90 calls on International Business Machines., long January 2014 $0 calls on International Business Machines., long January 2014 $10 calls on International Business Machines., and long January 2014 $0 puts on International Business Machines. The Motley Fool owns shares of International Business Machines. 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.

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