NEW YORK (TheStreet) -- International Business Machines Corp. (IBM) stock is up 0.40% to $152.01 in pre-market trade after the EU today said it approved the sale of Lufthansa's (DLAKY) IT infrastructure unit to the IT company, Reuters reports.
The unit provides data centers, networks and telephony. "The Commission concluded that the proposed acquisition would not raise competition concerns given the very limited overlaps between the parties' activities and the presence of several strong alternative players that would remain active after the merger," the EU executive said in a statement.
The deal, which was announced on October, will result in a one-off pre-tax charge of 240 million euros ($299 million) for Lufthansa. It will allow Lufthansa to reduce its annual IT costs by around 70 million euros a year, Reuters said.
Under the planned deal, Lufthansa will outsource all its IT infrastructure services to IBM under a seven-year deal and the U.S. firm will take over the airline's IT infrastructure division, currently part of Lufthansa Systems, 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 -2.41%.
- 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