IBM beats expectations, shares drop 4.5%

Posted Jan 18th 2007 5:18PM by Melly Alazraki
Filed under: After the Bell, Earnings Reports, From the Boards, Press Releases, International Business Machines (IBM)

International Business Machines Corp. (NYSE:IBM) reported fourth-quarter earnings after the close. Profits rose 11% in the fourth-quarter to $3.54 billion, or $2.31 a share compared to $3.19 billion, or $1.99 a share a year ago. Revenue rose 7.5% to $26.3 billion from $24.4 billion a year ago. Analysts were expecting earnings of $2.19 a share on $25.7 billion in revenue.

Although IBM's numbers were boosted, 5 cents per share, by gains from discontinued operations, its numbers without the gain still beat expectations. The results from the comparable quarter last year, however, were lowered by a one-time charge, affecting earnings by 12 cents per share.

Interestingly, shares of IBM are down 4.5% in after-hours trading following the report. One reason might be that while IBM boosted profits with cost cuts and acquisitions, its sales growth was somewhat lacking. However, IBM signed contracts in the amount of $17.8 billion, significantly higher than last quarter or last year, indicating future revenue.

IBM shares 52-week range is $72.73-$100.90 as the shares started their upward climb in the summer. It is conceivable that the good results were mostly priced in and that the real expectations for IBM results -- the "whisper numbers" -- were closer to what the company reported.

Also check out some other earnings reports that we're following, and let us know your thoughts on earnings expectations.

Tags: ibm

Print this

Reader Comments (Page 1 of 1)

1-18-2007 @ 11:45PM

Donald E. L. Johnson said...

IBM has been vulnerable to a correction following a runup of almost 33% since last summer. And its Jan 09 50 calls have jumped almost 25% in the last three weeks or so.

Standard point and figure charts show today's corrections, both before and after the close, as just noise. Similarly, monthly bar charts suggest the correction is just a blip.

But more sensitive point and figure charts and weekly and daily bar charts say sell.

The question, then, is whether IBM will bounce back following the correction? And what kind of correction is IBM in for? A 10% or 15% correction doesn't seem out of the realm of possibility. But, then, bargain hunters who don't watch the technicals may step in and provide support.

Before today, the price objective for IBM on a standard point and figure chart was $137; on a more sensitive chart, it was $109. These objectives, which are calculated by forumla, aren't the most accurate guides in the world.

And it appears they've missed on this one.

Note that at least one analyst had downgraded IBM last week, apparently based on valuation.

Nice call.

Darn it.