With dozens of companies having already reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk decision.
Let's turn to International Business Machines Corp. (NYSE:IBM) . With its gain of 6% in 2012, the tech giant wasn't able to match the total return of the Dow Jones Industrials . But with several positive trends taking hold in tech, can IBM bounce back and produce better results for shareholders? Let's take an early look at what's been happening with IBM's over the past quarter and what we're likely to see in its quarterly report next Tuesday afternoon.
Stats on IBM
| Analyst EPS Estimate | $5.25 |
| Change From Year-Ago EPS | 11.5% |
| Revenue Estimate | $29.12 billion |
| Change From Year-Ago Revenue | (1.2%) |
| Earnings Beats in Past 4 Quarters | 4 |
Source: Yahoo Finance.
Will IBM move the markets? IBM is one of the few stocks for which analysts have stayed comfortable with their earnings estimates. Despite falling revenue during 2012, the company was able to beat earnings estimates consistently, and the stock has been essentially unchanged since the roughly 8% plunge that followed its previous quarterly report.
Perhaps the biggest trend that IBM has been a part of is the quest to make profitable use of "big data." The concept refers to the massive collection of information that goes on every day, and IBM recently said that it would open a big data center, collaborating with Ohio State University. Other companies, however, are seeking to make use of big data, with Intel Corporation (NASDAQ:INTC) looking to bolster its presence in the server market while EMC Corporation?(NYSE:EMC) looks for ways to produce what it calls "agile analytics" and "actionable insights." Given IBM's superior reach into its wide array of enterprise customers, it'll be tough for Intel, EMC, and other potential competitors to stand up to Big Blue.
From a broader perspective, in interpreting IBM's earnings, keep in mind that the company has a long-term goal of hitting earnings per share of $20 by 2015. As a result, the company isn't focused as much on quarterly results as it might otherwise be, instead keeping one eye on the long-term prize. That's the true motivation behind big data, as well as other cloud-computing offerings designed to boost margins and avoid the overreliance on commoditized products that has brought down some of its rivals.
While most investors will focus on headline numbers and look for immediate guidance on IBM's future, you should take a step back and view the report and conference call as opportunities to see where IBM is going in the long run. That way, you'll have a better chance of deciding whether IBM can meet its long-term goals and bring the attendant share-price gains to its investors.
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