NEW YORK (TheStreet) -- International Business Machine (IBM) - Get Report earnings estimates were raised for the fiscal 2016 first and second quarter to $13.48 from $13.32, and to $13.87 from $13.51, respectively, at Barclays this morning.
The firm also boosted the company's price target to $140 from $125 and has an "underweight" rating on the stock.
In a "teeter totter" affect, Barclays says it's lowering the company's revenue estimates for the June quarter and circa 2016 to $19.5 billion from $19.6 billion, and to $77.8 billion from $78.3 billion.
The decrease in revenue estimates and increase in EPS are a result of IBM "aggressively" cutting costs to make up for its lower cloud-based revenue during its first year or two of operation, the firm said in an analyst note.
"Our research indicates that aggressive cost cuts could more than offset revenue weakness," the firm said. It expects cutting costs will increase IBM's operating margins for circa 2016 to 18.9% from 18.5%.
Barclays adds that it worries about IBM's "profit engine" software Middleware as research indicates 30-35% of its customers will move to cloud over time.
The firm said the margin increase is not enough for them to become "more constructive" on the stock, especially when looking at the company's uncertain revenue growth profile. But Barclays says investors could make it work: "We think investors could cheer this dynamic, even though we are not too excited about a company that could face chronic revenue declines."
Shares of IBM are down by 0.82% to $159 this morning.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate INTL BUSINESS MACHINES CORP as a Buy with a ratings score of B-. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
You can view the full analysis from the report here: IBM
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