With clouds of macroeconomic uncertainty swirling round the tech sector in recent months, the pressure's on IBM to deliver good numbers. Chip giant Intel (INTC), for example, which also reports Tuesday afternoon, recently lowered its outlook, citing the effects of a tough economic environment.
Investor sentiment around IBM, however, has been positive heading into its third-quarter numbers, with the company's shares enjoying a modest rally.
"Despite macroeconomic headwinds including a stronger USD, and based on our supply chain checks indicating software and services strength, we anticipate inline revenue and a slight beat in EPS," wrote Sterne Agee analyst Shaw Wu, in a note released on Tuesday. "For its outlook, we believe the company will likely back its raised 2012 view."In July, IBM raised its expectations for fiscal 2012 earnings to at least $15.10 a share from its prior forecast at least $15 a share The Armonk, N.Y.-based Dow component also eased past analysts' earnings forecast when it reported its second-quarter results back in July, although currency pressures weighed on the company's top line. Analysts surveyed by Thomson Reuters expect Big Blue to post third-quarter revenue of $25.4 billion and earnings of $3.61 a share, compared to $26.2 billion and $3.28 a share in the prior year's quarter. Sterne Agee's Wu predicts that software and services will lead the way for IBM. "In terms of IBM's business units, we are picking up that its sales force and distribution partners continue to focus on its software unit where we anticipate better performance because of its strong portfolio of offerings, higher margins, faster payback and shorter sales cycles," he wrote. "In its services business, we are encouraged by positive commentary and strong bookings from Accenture (ACN) and SAP (SAP). Moreover, it appears that HP (HPQ) is losing share with its restructuring note helping." Whereas rival HP is in the throes of a massive corporate overhaul, IBM completed its own metamorphosis years ago, successfully shifting its focus from low-margin hardware to high-margin software and services.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV