NEW YORK (TheStreet) -- International Business Machines Corp. (IBM) - Get Report stock is lower by 2.93% to $139.45 on heavy trading volume on Tuesday after the company disclosed it is being investigated by the Securities and Exchange Commission for the way the company reports revenue on some transactions.
So far today, 8.46 million shares of IBM have exchanged hands, compared with its average daily volume of 4.31 million shares
"In August 2015, IBM learned that the SEC is conducting an investigation relating to revenue recognition with respect to the accounting treatment of certain transactions in the U.S., U.K. and Ireland," the company said in a filing.
"IBM has a rigorous and disciplined process for the preparation of its financial statements and the reporting of revenue," IBM said today in a statement. "We are confident that the results and information we report have been appropriate and consistent with GAAP."
Separately, TheStreet Ratings team rates INTL BUSINESS MACHINES CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate INTL BUSINESS MACHINES CORP (IBM) a BUY. This is driven by a few notable strengths, 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 increase in net income, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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 -8.94%.
- Despite the weak revenue results, IBM has outperformed against the industry average of 26.8%. 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.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the IT Services industry and the overall market, INTL BUSINESS MACHINES CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- INTL BUSINESS MACHINES CORP's earnings per share declined by 12.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, INTL BUSINESS MACHINES CORP increased its bottom line by earning $15.66 versus $15.37 in the prior year. For the next year, the market is expecting a contraction of 4.6% in earnings ($14.94 versus $15.66).
- You can view the full analysis from the report here: IBM