ETFs In Focus As IBM Gears Up To Report Q3 Earnings

International Business Machines (IBM - Free Report) is scheduled to report third-quarter 2019 results on Oct 15 after market close. Being the world’s largest computer-services provider, it is worth taking a look at its fundamentals ahead of results.

IBM has shed 0.4% over the past three months and underperformed the industry, which declined 0.1% in the said time frame. The negative trend might reverse if IBM beats earnings estimates.

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Inside Our Methodology

IBM has a Zacks Rank #3 (Hold) and an Earnings ESP of -0.57%. According to our surprise prediction methodology, the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 and a positive Earnings ESP increases the odds of an earnings beat. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided going into an earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The stock has seen negative earnings estimate revision of seven cents for the third quarter over the past 30 days. The Zacks Consensus Estimate indicates substantial earnings decline of 22.8% from the year-ago quarter. IBM projects modest year-over-year revenue decline of 2.7%. However, its earnings track record is impressive, with the average four-quarter positive earnings surprise being 1.81%. The stock boasts a solid Value Score of A and belongs to a bottom-ranked Zacks industry (top 40%).

The Zacks Consensus Estimate for average target price is $157.75 with 40% of the analysts having a Strong Buy or a Buy rating and 60% having a Hold rating ahead of earnings. This represents nearly 10.5% upside from the current price.

What to Watch?

Investors’ attention is on IBM’s $34 billion Red Hat acquisition completed in July. The company anticipates the transaction to be accretive to free cash flow in the first year, and accretive to non-GAAP earnings per share by the end of the second year on completion.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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