NEW YORK (TheStreet) -- Shares of IBM (IBM) are slightly higher at $162.97 in pre-market trading after it was reported that the IT company is enjoying a wave of major technology outsourcing deals from European customers in the fourth quarter and the new contract signings are not over yet, Bart Van den Daele, IBM's general manager for strategic outsourcing in European, said in an interview with Reuters.
IBM announced the third in a string of billion dollar plus contracts late yesterday, saying it had won a seven-year, $1.25 billion deal with WPP, the world's top advertising agency, to run their operations in the cloud, Reuters said.
On Monday, IBM disclosed a multibillion-dollar deal to provide computer infrastructure services to Dutch bank ABN Amro. And last month, Deutsche Lufthansa (DLAKY) agreed a $1.25 billion contract for IBM to take over the German airline's information technology operations and staff, Reuters noted.
TheStreet Ratings team rates INTL BUSINESS MACHINES CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate INTL BUSINESS MACHINES CORP (IBM) a HOLD. 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 notable return on equity, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. 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.
- Net operating cash flow has slightly increased to $3,904.00 million or 3.82% when compared to the same quarter last year. In addition, INTL BUSINESS MACHINES CORP has also modestly surpassed the industry average cash flow growth rate of -2.61%.
- INTL BUSINESS MACHINES CORP's earnings per share declined by 8.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, INTL BUSINESS MACHINES CORP increased its bottom line by earning $15.34 versus $14.41 in the prior year. This year, the market expects an improvement in earnings ($16.17 versus $15.34).
- The debt-to-equity ratio is very high at 3.21 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, IBM maintains a poor quick ratio of 0.89, which illustrates the inability to avoid short-term cash problems.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the IT Services industry. The net income has significantly decreased by 99.5% when compared to the same quarter one year ago, falling from $4,041.00 million to $18.00 million.
- You can view the full analysis from the report here: IBM Ratings Report