United States computer hardware and service company IBM Corporation (NYSE: IBM) share price rallied over five percent in after hours trading on Tuesday (21 January), after beating analysts' estimates in its Q4 2019 financial result. Operating (non-GAAP) diluted earnings per share excludes $2.78 per share of charges for: amortization of purchased intangible assets and other acquisition-related charges, including pre-closing charges, such as financing costs; retirement-related charges; and tax reform enactment impacts. For the full 2019 year, revenues edged forward by 0.2 per cent to $77.1bn adjusted for divested businesses and currency.
Q4 2018 report: 2019 GAAP EPS of at least $12.45; Operating (non-GAAP) EPS of at least $13.90.
'We ended 2019 on a strong note, returning to overall revenue growth in the quarter, led by accelerated cloud performance, ' said Ginni Rometty, IBM chairman, president and chief executive officer.
The increase stemmed from IBM's acquisition of Red Hat, which it completed in the third quarter last year, helping boost the cloud and cognitive software division 8.7 per cent from a year earlier. The technology consulting unit had revenue of US$6.9 billion, which is down 4.8 per cent from the same period previous year.
It will take a couple of years to pay down the additional debt that the deal required, but the buyout is already paying dividends in the form of a cool $1 billion of additional revenue per quarter and a positive contribution to IBM's free cash flow. Sales grew by 16 per cent in the last three months of the year to $3bn, driven by the success of its IBM Z mainframes which grew revenues by 63 per cent annually.
Global Technology Services, which represents about 30 per cent of IBM's overall revenue, continued to decline. Holding the segment afloat was the Consulting arm, which grew four percent. After seeing shares underperform the market for years, IBM is finally looking up.
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Q4 2019 report: 2020 GAAP EPS of at least $10.57; Operating (non-GAAP) EPS of at least $13.35. "Looking ahead, this positions us for sustainable revenue growth in 2020, as we continue to help our customers move their mission-critical workloads to the hybrid cloud and scale up their efforts to become a cognitive enterprise". Plus, earnings and revenue topped analysts' expectations, and best of all, investors were pleased to see IBM increase forward-looking guidance.
What's the call on share price?
NYSE:IBM traded up $0.86 on Tuesday, reaching $139.17.
The quarter brought modest growth, but welcome.
The results beat Wall Street expectations. But for the full year, Systems sales tanked by five per cent.
Red Hat continues to see strong growth six months after closing a $34 billion merger deal with technology giant IBM. Wedbush restated a "neutral" rating and set a $155.00 price target (down previously from $165.00) on shares of IBM in a report on Thursday, October 17th.