The Money Man Behind Rick Santorum: Who Is Foster S. Friess?
Savings Experiment: Snow Removal
IBM (NYSE: IBM), whose colleagues include Microsoft (NASDAQ: MSFT), Hewlett-Packard (NYSE: HPQ), and Apple (NASDAQ: AAPL), reported a very nice first quarter after the bell on Monday. To my way of thinking, at least. Wall Street was a little disappointed. In the after-hours session, shares were off well over 1%.
Don't look to earnings as the catalyst for the disappointment. IBM earned $1.70 per diluted share, and according to Reuters, that beat expectations by three pennies. The problem had to do with the top line. The same source said that the market was looking for $22.6 billion in net sales.
Unfortunately, IBM delivered only $21.7 billion in revenues. That represented an 11% drop if you don't exclude currency effects (excluding them gives you a decline of 4%, which sounds a lot better, certainly).
Okay, so revenues missed the mark. That is meaningful, of course, but as I check through some of the other stats, I can't help but feel that IBM is doing okay. For instance, there was a nice jump in free cash flow. While growth in operational cash flow was on the flat side, free cash flow increased from $593 million in the comparable period last year to over $1 billion in the most recent quarter. Driving this positive development was a lower amount of capital spending. Margins also saw an increase.
When I put it all together, I come away with a good feeling when it comes to IBM. Of course, that might not help the stock. We've all been warned that the recent rally in the markets was getting tired. Monday's big drop might be the precursor to a choppy earnings season. If that turns out to be the case, then shares of IBM may become increasingly volatile along with everything else.
But I think IBM is in a decent position. It bought back stock in the last quarter (not every company is doing that these days), it's paying dividends, and management believes that its previous goal of earning $9.20 per share for the full fiscal year remains attainable. If you own IBM, I see no reason to sell it, as I believe management did a good job in the quarter, even with the disappointing revenue number.
Disclosure: I don't own any company mentioned; positions can change without notice.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
