IBM Analysis: Dow Earnings

BOSTON (TheStreet) -- Technology company IBM (IBM) has reported quarterly results.

Quarterly Synopsis: IBM's fourth-quarter sales increased 7% to $29 billion, a record quarterly tally. Net income also hit an all-time high of $5.3 billion and diluted earnings per share advanced 16% to $3.59. The company's gross profit margin widened from 48% to 49%, demonstrating continued strong pricing. Specific operating units grew at vastly different rates. Software revenue increased 11%, excluding divested operations. Systems and technology revenue advanced 21%. System mainframe revenue soared 69%. Services revenue, IBM's bread-and-butter, climbed a more modest 2%, adjusted for currency effects. The services backlog jumped $8 billion, sequentially, indicating strong demand.

Earnings Performance: IBM delivered adjusted quarterly earnings of $4.18, up 16% year-over-year, exceeding analysts' consensus expectation by 2.5%. By comparison, IBM has an historical earnings beat rate of 4.3% and it has exceeded expectations by a single-digit percentage in 11 consecutive quarters. The adjusted sales figure, up 6.6% from the year-earlier quarter, beat expectations by 2.6%. By comparison, IBM has an historical sales beat rate of negative 0.4%. Furthermore, it has missed analysts' consensus sales forecasts in five of the past 11 quarters.

Dividend Information: IBM pays a quarterly dividend of 65 cents, converting to an annual yield of 1.7%. Although its stock isn't among the highest-yielding in the Dow, it has the best dividend growth over a five-year span, having boosted the payout 26% a year, on average. It has increased the dividend 19% a year, on average, over a three-year span, also topping the Dow. Furthermore, its payout ratio is traditionally conservative, alleviating income worry.

Analyst Opinions: Currently, 18, or 67%, of analysts covering IBM advise purchasing its stock and nine recommend holding it. No analysts advocate selling. IBM ranks in the middle of the Dow, at 12th, for net rating. It has a median 12-month target of $155.83.

Citigroup, Buy, $160 Target
Sanford Bernstein, Outperform, $160 Target
Deutsche Bank, Buy, $155 Target
Goldman Sachs, Neutral, $150 Target
JPMorgan, Overweight, $150 Target
UBS, Neutral, $144 Target
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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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