IBM Misses Top Line, Boosts EPS Forecast, Stock Slides After Hours

Putting the cherry on top of an ugly day for bulls comes global tech vanguard IBM, which did not use the DVA wildcard and still saw its earnings beat already reduced expectations of $3.22, printing at $3.28... but... it did miss the consensus top line of $26.34 billion by just under $200 milllion, at $26.16 billion. Since this the first time in probably forever that Big Blue has not beat the top line, the stock is certainly not too happy after hours. That this is happening despite the company's boost to its EPS forecast is quite troubling.

Earnings summary:

  • Q3 Revenue USD 26.16bln vs. Exp. USD 26.34bln
  • Q3 Operating margin 46.8% vs. Exp. 46.24%
  • Q3 Services backlog of USD 137bln, up USD 2.4bln
  • Q3 Software revenue USD 5.8bln, up 13%
  • Q3 Americas revenue USD 10.9bln
  • Sees year adjusted EPS at least USD 13.35, saw USD 13.25 vs. exp. USD 13.33

Also notable is that total ST and LT debt increased by $1.5 billion from $28.5 billion at December 31, to $30 billion at the end of Q3: at least someone is benefitting from relevarging at all time low yields.

From the release:

"In the third quarter, we drove revenue growth, margin expansion and increased earnings as a result of our innovation-based strategy and continued investment in growth initiatives," said Samuel J. Palmisano, IBM chairman, president and chief executive officer. “Growth markets delivered outstanding revenue performance across software, hardware, and services and contributed to the company's expanded margins. We also achieved strong results in Smarter Planet, business analytics and cloud.

"Based on this performance, we are raising our 2011 full-year operating earnings per share expectations to at least $13.35."

Full-Year 2011 Expectations

IBM raised its expectations for full-year 2011 GAAP diluted earnings per share to at least $12.95 from at least $12.87; and operating (non-GAAP) diluted earnings per share to at least $13.35 from at least $13.25. The 2011 operating (non-GAAP) earnings exclude $0.40 per share of charges for amortization of purchased intangible assets, other acquisition-related charges, and retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.


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