This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

IBM & HP: Tech Titans Facing Headwinds

NEW YORK ( TheStreet) -- IBM (IBM - Get Report) and HP (HPQ - Get Report) may be tech heavyweights, but both companies are facing tough challenges as they head into an uncertain earnings season.

Big Blue reports its second-quarter results after market close on Wednesday amid growing macro-economic concerns, particularly overseas. The Americas accounted for just 42.5% of IBM's total first-quarter sales, highlighting the company's exposure to risks such as Europe's ongoing debt crisis.

Despite IBM's reputation as a stable stock for uncertain economic times, the company's shares have slipped more than 8% to $185.10 during the last three months, easily outpacing the Nasdaq's 3% dip.

IBM, which often sets the tone for tech earnings season, has some major hurdles in its path, according to Brian Marshall, an analyst at ISI Group.

"In our view, valuation is full and with currency headwinds worse than expected, coupled with [around] 60% international exposure, maintaining [more than] 10% EPS growth will become increasingly difficult," he explained, in a recent note.

The analyst, who has a neutral rating on the Armonk, N.Y.-based Dow component, has lowered his second-quarter revenue estimate to $26.3 billion from $26.6 billion. Marshall also lowered his earnings forecast to $3.39 a share from $3.41 a share.

Analysts surveyed by Thomson Reuters are looking for revenue of $26.3 billion and earnings of $3.42 a share in the June-ended period.

IBM missed Wall Street's revenue forecast in its first-quarter results earlier this year, weighed down by lackluster year-over-year services growth and falling sales in its Systems and Technology group. The hardware and software giant, however, raised its earnings estimate for fiscal 2012 to at least $15 per share from from $14.85.

ISI Group's Marshall acknowledged that IBM has been "a model of steady execution" in recent years, but expects little change to his $15 2012 earnings estimate after the report.

Even bigger clouds are gathering over HP, which has seen its shares tumble more than 20% in the last three months.

HP shares came under particular pressure last week after printer maker Lexmark (LXK - Get Report) cut its second-quarter outlook, citing a weaker-than-expected demand environment, particularly in Europe, and unfavorable changes in currency exchange rates. These trends hardly bode well for HP.

HP's Imaging and Printing Group (IPG) accounted for 20% of the company's total revenue in its recent fiscal second-quarter results. IPG sales declined 10% compared to the prior year's quarter, underlining the challenges HP faces in the printing space.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
IBM $128.57 0.00%
HPQ $9.91 0.00%
LXK $27.70 0.00%
AAPL $94.02 0.00%
FB $104.07 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs