Last week, you might have seen International Business Machines Corporation (NYSE: IBM) release their annual earnings. The early response wasn’t positive: stocks fell 7.6% to $ 119 over the past week. International Business Machines had sales of $ 74 billion, roughly in line with analysts ‘forecasts, although statutory earnings per share (EPS) of $ 6.23 was above expectations and 3.8% above analysts’ expectations. Analysts typically update their projections with each earnings report and we can use their estimates to assess whether their view of the company has changed or whether there are new concerns to consider. With that in mind, we’ve compiled the latest legal outlook to see what analysts expect for the next year.
Check out our latest analysis for International Business Machines
According to last week’s earnings report, the 13 analysts at International Business Machines forecast sales of $ 74.2 billion in 2021, roughly equivalent to the last 12 months. Statutory earnings per share are expected to increase 42% to $ 8.78. Prior to this report, the analysts had modeled revenue of $ 74.7 billion and earnings per share (EPS) of $ 9.41 in 2021. So it looks like general sentiment has eased slightly after the latest results, but the sales estimates haven’t changed much, but analysts have downgraded their earnings per share projections slightly.
It might come as a surprise to learn that the consensus price target remained broadly unchanged at $ 137, with analysts clearly implying that the projected drop in earnings is unlikely to have much of an impact on valuation. However, setting a single price target can be unwise because the consensus target is effectively the average of the analyst price targets. As a result, some investors enjoy looking at the different estimates to see if there are different opinions about company valuation. The most bullish international business machine analyst has a price target of $ 160 per share, while the most pessimistic is $ 117. As you can see, analysts don’t all agree on the future of the stock, but the range of estimates is still quite narrow, which could indicate that the outcome isn’t entirely unpredictable.
Another way to look at these projections is, of course, to put them in context with the industry itself. These estimates suggest that given the flat sales forecast for next year, analysts expect the years to end with declining sales. This would be a significant improvement as sales have declined by five years annually for the past five years. Compare that to analyst estimates for the entire industry, which suggest that industry sales (overall) will grow 14% over the next year. So it’s pretty clear that International Business Machines is still expected to grow more slowly than the industry despite improved sales.
The bottom line
The biggest concern is that analysts have scaled back their earnings per share estimates, suggesting that the business wind for International Business Machines may be ahead. Fortunately, analysts also re-affirmed their sales estimates, suggesting sales are in line with expectations – although our data suggests International Business Machines sales are likely to outperform the industry as a whole. The consensus price target stayed steady at $ 137, with recent estimates insufficient to affect their price targets.
With that in mind, we would not be too quick to come to a conclusion about international business machines. Long-term profitability is much more important than next year’s profits. We have forecasts for International Business Machines for 2025, which you can see for free on our platform here.
We don’t want to rain too much on the parade, but we also found 3 international business machine warning signs to watch out for.
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