NEW YORK (TheStreet) -- Shares of International Business Machines Corp. (IBM) - Get Report are up by 1.35% to $139.47 in mid-morning trading on Tuesday, as the stock is rising on the possibility of a new business opportunity related to forecasting air pollution levels in China.
Both IBM and rival Microsoft (MSFT) are looking to break into the new, fast growing market for predicting air quality in the largest carbon emitters in the world, NBC News reports.
Authorities in the Chinese capital of Beijing declared two "red alerts" this month, warning the 22 million people living in the city that heavy pollution was expected for more than three days.
These alerts rely on advances in pollution forecasting, NBC added.
"There is increasing attention to the air quality forecast service," Yu Zheng, a researcher at Microsoft told NBC. "More and more people care about this information technology."
IBM and Microsoft obtained their first government clients last year after each developed its own pollution forecasting technology at their China-based labs.
Chinese authorities began releasing real-time levels of PM2.5, which is airborne particulate matter under 2.5 microns in diameter that can penetrate deep into the lungs in 2012, NBC added.
Recently, 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 Hold with a ratings score of C+. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and feeble growth in the company's earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 16288.9% when compared to the same quarter one year prior, rising from $18.00 million to $2,950.00 million.
- Net operating cash flow has slightly increased to $4,235.00 million or 8.47% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -12.91%.
- Despite the weak revenue results, IBM has outperformed against the industry average of 26.9%. Since the same quarter one year prior, revenues fell by 13.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, IBM has underperformed the S&P 500 Index, declining 14.61% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The debt-to-equity ratio is very high at 2.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, IBM's quick ratio is somewhat strong at 1.03, demonstrating the ability to handle short-term liquidity needs.
- You can view the full analysis from the report here: IBM