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IBM (IBM) is scheduled to report results of its fiscal second quarter after the market close on July 19, with a conference call scheduled for 5:00 pm ET. What to watch for:

GUIDANCE: Along with its last report, IBM guided for fiscal 2023 constant currency revenue growth of 3%-5%, noting at the time that currency was expected to be neutral to revenue growth. At the time, analysts were expecting the company to report FY23 revenue of $62.69B, but that figure has since fallen to $62.27B. Additionally, Wall Street expects IBM to report Q2 earnings per share of $2.01 on revenue of $15.57B.

BMO CUTS PT: Earlier this week, BMO Capital raised the firm's price target on IBM to $150 from $145 and kept a Market Perform rating on the shares. The firm thinks IBM can modestly grow Software revenues, excluding Red Hat, helped by an improvement in its Transaction Processing growth prospects due to more aggressive pricing strategy and high retention, but tells investors in a research note that its Consulting business faces cross currents including macro-related headwinds, and longer-term deflationary impact of generative AI.

JPMORGAN INITIATION: Earlier this month, JPMorgan initiated coverage of IBM with a Neutral rating and $145 price target, implying 8% upside. Following the recent spinoff of the company's managed infrastructure services business, IBM is "cleaner and easier to follow," with over 70% of the business now attributable to the higher-growth Software and Consulting businesses well positioned to benefit from attractive secular tailwinds, the analyst tells investors in a research note. However, the firm thinks the setup for the stock could be challenging as investors continue to weigh risk to numbers from potential macroeconomic and mainframe cycle headwinds. As such, it sees a balanced risk/reward at current share levels.

APPTIO: In late June, IBM announced that it has entered into a definitive agreement with Vista Equity Partners to purchase Apptio for $4.6B. The acquisition of Apptio will accelerate the advancement of IBM's IT automation capabilities and enable enterprise leaders to deliver enhanced business value across technology investments, the company said.

Following the announcement, Credit Suisse analyst Shannon Cross noted that Apptio has collected anonymized data on $450B of IT spending across its customer base which the firm expects IBM to contribute to its foundational AI models, integrate into existing products and utilize for better insights within its Consulting business. Apptio's tools are offered on a subscription basis and Credit Suisse estimates Apptio will add around $600M of software revenue, which would imply an 8-times revenue multiple for valuation. Further, the firm believes the transaction is timely given the amount of data Apptio is bringing with it and increased attention to optimization of cloud spend. Credit Suisse has an Outperform rating on IBM's shares with a price target of $162.

Additionally, Stifel analyst David Grossman at the time made no change to the firm's Buy rating and $140 price target on IBM. The firm told investors in a research note that Apptio complements IBM's automation software portfolio, and notes that IBM is historically good at leveraging its global distribution and client base to drive incremental growth and margin of acquired software assets.

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