Buy IBM on Strong Earnings, Jim Cramer Says

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Jim Cramer said IBM earnings report would be the one to watch, and last night’s quarterly results proved him right.

Big Blue soared after reporting adjusted earnings per share of $2.18 on total revenue of $18.12 billion. Analysts had expected earnings of $2.07 on revenue of $17.72 billion.

Revenue from IBM’s cloud division rose 30% year over year to $6.3 billion while revenue from its Red Hat acquisition rose 17% in the quarter.

IBM also ended the quarter with $14.3 billion in cash on hand.

"Our prudent financial management in these turbulent times enabled us to expand our gross profit margin, generate strong free cash flow and improve our liquidity," CFO James Kavanaugh said in the earnings release.

The company also returned $1.5 billion to shareholders in dividends and stock buybacks. "We have the financial flexibility to continue to invest in our business and return value to our shareholders through our dividend policy,” Kavanaugh said.

The quarter marked a big success for new CEO Arvind Krishna, who took the reins from Ginni Rometty earlier in 2020. "We are doing a lot of work on the back-end to bring our portfolio together in a more cohesive fashion, so our teams can come with simpler and more relevant proposals," Krishna said. 

Following the report, Cramer told his Twitter followers that very few on Wall Street expected this kind of beat from IBM. 

How should investors approach the stock going forward? 

Cramer said the stock is far too cheap after the earnings surprise and IMB is a buy, right here, right now. 

Catch his full take in the video above. 

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