Today following the end of regular trading, IBM reported its second-quarter financial performance, including revenue of $20.8 billion and adjusted earnings per share of $3.84. Using normal accounting methods, IBM had a slimmer $3.58 per-share profit.
The street had expected the enterprise firm to generate $3.78 of adjusted per-share profit on revenue of $20.95 billion of revenue. According to Yahoo Finance, that revenue expectation represented a 14 percent decline compared to the year-ago quarter. The company beat on profit, but missed on revenue.
In the case of IBM, the firm is currently graded more steeply on revenue than profit; its ability to squeeze profit out of its current top line is pleasant, but not a long-term solution to its slimming. If IBM can’t kickstart its revenue engines, its future cash-flows, and profits, are deprecated implicitly. It’s a situation similar to Yahoo, in some broad ways.
If you grant IBM latitude, and allow it to adjust both for the impact of a strong dollar, and adjusted for divested business units, the firm had a much slimmer 1 percent retraction of top line. However, those are not-small caveats. As IBM states in its report, its revenue is “down 13 percent as reported.”
During the three-month period, IBM had net income of $3.45 billion using normal accounting methods. The company ended its quarter with $8.4 billion in cash and equivalents, down modestly from the year ago quarter. IBM’s long-term debt is down slightly compared to the year-ago quarter, totaling $33.3 billion.
IBM affirmed its prior guidance, noting that it will earn $14.25 to $15 on a GAAP basis, and $15.75 to $16.50 using adjusted techniques during the current year. The firm has recorded $40.4 billion in half-year revenue to date.
On a more positive note, IBM guided the street to expect stronger-than-anticipated free cash flow during the year, noting in a following paragraph that its total revenue from cloud services grew 50 percent to $8.7 billion, compared to the year-ago quarter.
Following its mixed earnings, IBM is down just over 4 percent in after-hours trading. The firm rose a fraction during normal trading hours in broadly up markets.
The improved guidance, fused with the fact that IBM’s current projects are growing, likely supported the stock from declining further.