Will Slightly Higher Revenues Benefit IBM's Q3 Earnings?
International Business Machines Corporation IBM is scheduled to report third-quarter 2022 results on Oct 19, after the closing bell. In the last reported quarter, the New York-based integrated systems provider beat the Zacks Consensus Estimate by 2 cents. The company is expected to have recorded slightly higher aggregate revenues year over year despite a challenging macroeconomic environment and softness in traditional businesses.
Factors at Play
During the third quarter, IBM reinforced its alliance with the United States Tennis Association (“USTA”) with a five-year renewal deal. The USTA and IBM iX, which is the experience design arm of IBM Consulting, have worked to develop and design the updated website and app, enabling fans across the world to mark their favorite players and curate their digital experience based on their own selections. Relevant and contextual content and insights have been redeveloped through the updated Scores, Schedule, Draws and Players sections.
IBM also collaborated with VMware, Inc. to assist global clients and partners in improving mission-critical workloads alongside accelerating time-to-value in hybrid cloud environments. It will help clients improve their hybrid cloud journeys and business transformations by being Global Systems Integrator for VMware. As a result, clients running applications across more than one cloud will obtain assistance regarding security, management and reliability in such situations. These are likely to have driven the top-line growth in the Cloud & Cognitive Software segment.
The company further expanded its partner relationships in AI, network automation and security to help the telecommunications industry evolve as 5G and Edge Computing take center stage. During the quarter, IBM inked an agreement with Bharti Airtel for an undisclosed amount to deploy an edge computing platform in India. This is likely to extend the secured cloud services for business enterprises while improving their performance through reduced latency and higher data security features. These are likely to have driven incremental revenues in the Global Business Services segment.
However, escalating expenses toward cloud platform development amid intense competition in the cloud space are likely to have eroded its margins. In addition, the company is likely to have recorded lower revenues in the Global Technology Services segment owing to challenging macroeconomic conditions and rising inflationary pressures.
The Zacks Consensus Estimate for total revenues for the company stands at $13,749 million. Our revenue estimate for the quarter is pegged at $14,159 million. It generated restated revenues of $13,251 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $1.78 per share, indicating a decline from the restated tally of $1.84 in the year-earlier quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for IBM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -6.39%, with the former pegged at $1.67 and the latter at $1.78. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
International Business Machines Corporation Price and EPS Surprise
International Business Machines Corporation price-eps-surprise | International Business Machines Corporation Quote
Zacks Rank: IBM currently has a Zacks Rank #3.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
AT&T Inc. T is set to release quarterly numbers on Oct 20. It has an Earnings ESP of +2.70% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Verizon Communications Inc. VZ is +0.26% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Oct 21.
The Earnings ESP for T-Mobile US, Inc. TMUS is +8.18% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct 27.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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