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IBM (IBM) Gains But Lags Market: What You Should Know

Zacks Equity Research

In the latest trading session, IBM (IBM) closed at $105.85, marking a +0.35% move from the previous day. The stock lagged the S&P 500's daily gain of 1.15%. Meanwhile, the Dow gained 2.39%, and the Nasdaq, a tech-heavy index, lost 0.45%.

Prior to today's trading, shares of the technology and consulting company had lost 25.57% over the past month. This has lagged the Computer and Technology sector's loss of 18.62% and the S&P 500's loss of 24.07% in that time.

IBM will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $1.95, down 13.33% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $18.25 billion, up 0.35% from the year-ago period.

IBM's full-year Zacks Consensus Estimates are calling for earnings of $13.32 per share and revenue of $78.43 billion. These results would represent year-over-year changes of +3.98% and +1.66%, respectively.

Investors should also note any recent changes to analyst estimates for IBM. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Within the past 30 days, our consensus EPS projection has moved 0.3% lower. IBM currently has a Zacks Rank of #3 (Hold).

Digging into valuation, IBM currently has a Forward P/E ratio of 7.92. This valuation marks a premium compared to its industry's average Forward P/E of 5.83.

Meanwhile, IBM's PEG ratio is currently 1.45. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. IBM's industry had an average PEG ratio of 1.11 as of yesterday's close.

The Computer - Integrated Systems industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 96, putting it in the top 38% 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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