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IBM (IBM) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research

IBM (IBM) closed the most recent trading day at $134.98, moving -0.42% from the previous trading session. This change lagged the S&P 500's 0.02% loss on the day. Meanwhile, the Dow lost 0.13%, and the Nasdaq, a tech-heavy index, added 0.08%.

Coming into today, shares of the technology and consulting company had lost 0.31% in the past month. In that same time, the Computer and Technology sector gained 4.7%, while the S&P 500 gained 3.81%.

IBM will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $4.69, down 3.7% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $21.67 billion, down 0.42% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $12.80 per share and revenue of $77.03 billion, which would represent changes of -7.31% and -3.22%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for IBM. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.03% higher within the past month. IBM currently has a Zacks Rank of #3 (Hold).

In terms of valuation, IBM is currently trading at a Forward P/E ratio of 10.59. For comparison, its industry has an average Forward P/E of 11.6, which means IBM is trading at a discount to the group.

It is also worth noting that IBM currently has a PEG ratio of 2.12. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Computer - Integrated Systems was holding an average PEG ratio of 1.7 at yesterday's closing price.

The Computer - Integrated Systems industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 227, which puts it in the bottom 11% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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