ETFs In Focus Post Mixed IBM Q4 Earnings

Image: Bigstock

After the closing bell on Jan 21, International Business Machines (IBM - Free Report) reported robust fourth-quarter 2020 results. The company beat earnings estimates but missed on revenues.

Earnings per share came in at $2.07, surpassing the Zacks Consensus Estimate by 29 cents, but declining from the year-ago earnings of $4.71. Revenues declined 6% year over year to $20.4 billion and fell short of the consensus estimate of $20.59 billion. This represents the fourth consecutive quarter of revenue decline. Weaker-than-expected revenues came from a rare sales decline in its software unit as clients shied away from longer-term deals due to the pandemic-induced economic uncertainty.

This weakness was unable to offset by strength in the cloud computing business. Notably, Cloud revenues increased 10% to a record $7.5 billion in the fourth quarter.

The company has been undergoing changes by shedding its legacy business to focus on the growing cloud business. Last October, IBM announced that it would spin off its managed-infrastructure business as a new publicly-traded company in a tax-free deal for IBM shareholders. The separation is expected to be completed by the end of 2021. The move will allow IBM to be "laser-focused on the $1 trillion hybrid-cloud opportunity.”

Though Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) dominate the cloud market, the spin-off would help to revive fortunes at the 109-year-old company. IBM expects returning to sales growth in 2021, citing confidence in the sales rebound in the global business services unit and a weaker dollar.

As revenues are on a continued deceleration path, shares of IBM sank nearly 7% in after-market hours. The stock has a Zacks Rank #3 (Hold) and a VGM Score of A. It belongs to a bottom-ranked Zacks industry (bottom 16%).

ETFs to Watch

Given this, ETFs with the highest allocation to this tech giant will be in focus. Investors should closely monitor the movement of these funds and grab the opportunity whenever it arises.

1 2 3
View single page >> |

Disclosure: 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 ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.