IBM stock jumps on earnings beat and boosted full-year forecast
Jared Blikre checks out IBM shares following its third-quarter earnings report.
Video Transcript
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- All right, we have earnings results keep rolling in. IBM out with their quarterly numbers. Jared Blikre has that for us. Hey, Jared.
JARED BLIKRE: That's right, and you can see the stock up almost-- well, it's up 4% in after-hours trading. That's that for third-quarter results showing a bead on top-line revenue, $14.11 billion, beating the Street estimate by about half a billion dollars, $13.53 billion. That number is up 6 and 1/2% year over year.
Adjusted gross margin coming in at 53.8%. That best the estimate of 55.3%. Operating EPS-- this is that bottom-line number-- one point-- $1.81, and that exactly meets the estimate of $1.81, as well. Free cash flow ending the quarter a little bit light at $752 million. The estimate was for quite a bit higher, $2.76 billion.
In terms of their full-year forecast, they are seeing constant currency revenue growth above the mid-single-digit model, and the previously, they saw it at the high end of this mid-single-digit model. Still seeing free cash flow of about $10 billion. The estimate was for $10.04 billion, so we're going to call that in line. And then GAAP results include the impact of a one-time non-cash pension settlement charge of $5.9 billion. And that is $4.4 billion net of tax.
I do have a quote from the CEO and chairman, Arvind Krishna. He said, "IBM delivered strong revenue growth in the quarter, reflecting our continued focus on the execution of our strategy. Globally, clients view technology as an opportunity to enhance their business, which is evidenced in the results across the portfolio. With our year-to-date performance, we now expect full-year revenue growth above our mid-single-digit model."
And just pointing out, too, at mid-October, the foreign exchange rates currency, they're expected to be about a 7-point headwind, so that is a big headwind caused by the US dollar.
Just want to show you a chart real quick. This is the-- over the last year, this is IBM stock. You can see very choppy here, although ending on the lower end of the range. On the 20-year view, also pretty low here, but breaking out recently from that very long trend line there, guys.
- Yeah, certainly, they have outperformed some of their peers, at least when you take a look-- when you align up IBM against some of the larger tech players as of late. Pretty strong results here. That's why we're seeing the-- the stock pop, Jared, like you were just saying, after hours, in terms of they also lifted their full-year revenue guidance. So revenue for the quarter, though, coming in at $14.1 billion.
And Dave, I was able to-- I spoke with Gary Cohn, the vice chairman of IBM, earlier this week, and we were talking about the CHIPS Act. And I bring that up because it's so central to so many of these players. And he was saying that the rollout is going well. It's a little bit slower, although that had been anticipated.
IBM was one of the companies that did come out with an announcement. They announced $20 billion commitment to their New York State facilities. He also went on to say that there is leverage in the system now. The big problem that they face is just in terms of speeding up the permitting process. That's what the government is facing right now.
But it will be interesting if we do hear any more commentary on that and the impact of the CHIPS Act, not only on IBM, but really on the sector at large here during this earnings call that will get underway later this afternoon.
- This CHIPS Act has certainly not been the catalyst that many thought it would be, going all the way back to when that was first passed, let alone the recent action. And really surprising to see the numbers, given the strength of the dollar. Because they had said commentary leading up that they expect the strengthening dollar to be a massive headwind and cut down.
So really, when you take into context all the issues they're facing and all the headwinds, a pretty darn good report. And that's why you see after hours up about 3.7% after a beat there for IBM.
