The stock rose 6% to $134 a share in post-market trading, after having run up 9.5% in the last week-and-a-half, as value stocks have moved back in favor with investors for July. It’s trading at a fairly full valuation, at almost 11 times next year’s earnings, which is a tick above its 5-year average, as investors hope for a 2021 earnings rebound from 2020.
Here were the results versus what Wall Street was expecting:
- Revenue: $18.12B v. $17.73B (actual: -5.4% year-over-year)
- Cloud Revenue: $5.74B v. $5.74B (+1.7%)
- Global Business Services: $3.89B v. $3.87B (-7%)
- Global Technology Services: $6.316B v. $6.25B (-8.5%)
- Operating Margin: 12.8% v. 14% (Last year: 13.5%)
- Adjusted EPS: $2.18 v. $2.09 (-31%)
The operating margin did contract over last year’s margin as the company experienced a far higher tax rate in the second quarter compared to last year’s second quarter.
"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 position," James Kavanaugh, IBM’s chief financial officer said. "We have the financial flexibility to continue to invest in our business and return value to our shareholders through our dividend policy.” IBM, which does have a considerable amount of debt, was able to distribute $1.5 billion to shareholders in dividends and stock buybacks.
The stock is still more than 15% below its 2020 high.