International Business Machines (IBM) - Get Report is alive and the market seems to love it again.
Its shares, at around $151, are up nearly 10% for the year to date although down 7% for the past 52 weeks. Big Blue reports first-quarter earnings Monday after the close.
Why is this stock worth buying now? Because its rewards far outweigh its risks.
Analysts, on average, expect first-quarter earnings of $2.08 per share on revenue of $18.25 billion; a year ago earnings were $2.91 cents per share on revenue of $19.59 billion. For the year earnings are projected to decline 9.5% to $13.50 per share, while revenue of $77.94 billion would mark a decline of 4.7%.
Why has IBM's fortunes improved? Partnerships with a number of companies and recent acquisitions, including Bluewolf Group, a prominent player in cloud consulting and an important partner to Salesforce.com (CRM) - Get Report . This is expected to give IBM access to more higher-margin business areas including consulting and cloud computing.
IBM shares are still cheap, trading at only 11 times fiscal 2016 estimates of $13.50 per share, or six points below the S&P 500 (SPX) index. The stock is even cheaper when projecting out to 2017, where the consensus estimate stands at $14.17 per share.
Finally, IBM will pay you for your patience, offering a solid quarterly dividend of $1.30 per share that yields 3.50% annually, higher than the 2% average yield paid out by stocks in the S&P 500 index.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
