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Shareholders might have noticed that International Business Machines Corporation (NYSE:IBM) filed its full-year result this time last week. The early response was not positive, with shares down 7.6% to US$119 in the past week. International Business Machines reported US$74b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$6.23 beat expectations, being 3.8% higher than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following last week's earnings report, International Business Machines' 13 analysts are forecasting 2021 revenues to be US$74.2b, approximately in line with the last 12 months. Per-share earnings are expected to leap 42% to US$8.78. Before this earnings report, the analysts had been forecasting revenues of US$74.7b and earnings per share (EPS) of US$9.41 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
The consensus price target held steady at US$137, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic International Business Machines analyst has a price target of US$160 per share, while the most pessimistic values it at US$117. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. From these estimates it looks as though the analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past five years have seen sales shrink five years annually. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 14% per year. Although International Business Machines' revenues are expected to improve, it seems that it is still expected to grow slower than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for International Business Machines. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that International Business Machines' revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$137, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple International Business Machines analysts - going out to 2025, and you can see them free on our platform here.
Plus, you should also learn about the 3 warning signs we've spotted with International Business Machines .
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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