On Jan. 17, IBM (NYSE: IBM) released earnings for the fiscal year ended Dec. 31, 2007.
- We already knew what the sales and earnings would look like after the preannouncement earlier this week. While that was a tasty starter, the details are really quite delicious.
- Here's a scrumptious chain of events for you: Sales growth easily outpaced inflation, but net profits ballooned even faster. Combined with a generous share buyback program, earnings per share virtually exploded. Still, free cash flow nearly managed to match the EPS gains.
- The world outside U.S. borders generated 65% of IBM's revenue, but 75% of its operational profits. There's greater-than-10% revenue growth happening in places like Poland, Pakistan, Portugal, and Paraguay.
(Figures in millions, except per-share data)
Income Statement Highlights
|
FY 2007 |
FY 2006 |
Change | |
|---|---|---|---|
|
Sales |
$98,786 |
$91,424 |
8.1% |
|
Net Profit |
$10,418 |
$9,492 |
9.8% |
|
EPS |
$7.18 |
$6.11 |
17.5% |
|
Diluted Shares |
1,451 |
1,554 |
(6.6%) |
Get back to basics with the income statement.
Margin Checkup
|
FY 2007 |
FY 2006 |
Change* | |
|---|---|---|---|
|
Gross Margin |
42.2% |
41.9% |
0.4 |
|
Operating Margin |
14.7% |
14.6% |
0.1 |
|
Net Margin |
10.5% |
10.3% |
0.2 |
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets |
FY 2007 |
FY 2006 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$16,146 |
$10,657 |
51.5% |
|
Other short-term assets |
$37,031 |
$34,003 |
8.9% |
|
Liabilities |
FY 2007 |
FY 2006 |
Change |
|---|---|---|---|
|
Short-term liabilities |
$32,076 |
$31,189 |
2.8% |
|
Long-Term Debt |
$19,539 |
$13,780 |
41.8% |
The balance sheet reflects the company's health. IBM chose to report some of their balances in a non-standard, lumped-together format.
Cash Flow Highlights
|
FY 2007 |
FY 2006 |
Change | |
|---|---|---|---|
|
Cash From Ops. |
$17,400 |
$15,307 |
13.7% |
|
Capital Expenditures |
$5,000 |
$4,700 |
6.4% |
|
Free Cash Flow |
$12,400 |
$10,607 |
16.9% |
|
$11,918 |
$10,075 |
18.3% |
Free cash flow is a Fool's best friend. Many of the cash flow figures come from the earnings call, where management handed out nice, round numbers. Owner earnings were calculated from reported financial items.
Competitive Context
|
Market Cap |
Trailing P/E Ratio |
CAPS Rating | |
|---|---|---|---|
|
Microsoft (Nasdaq: MSFT) |
$315,610 |
22.1 |
*** |
|
IBM |
$143,790 |
15.4 |
*** |
|
Hewlett-Packard (NYSE: HPQ) |
$112,990 |
16.4 |
**** |
|
Oracle (Nasdaq: ORCL) |
$111,260 |
23.7 |
**** |
|
EMC (NYSE: EMC) |
$36,130 |
24.3 |
***** |
Using the latest reported numbers from Capital IQ. Keep your partners close and the competition in your vest pocket.
Related Foolishness:
- IBM Says It's a Beautiful World
- Fool Awards 2007: Most Shareholder-Friendly Company
- I Like Big Moats and I Cannot Lie
Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.
