International business Machines (IBM – Free Report) is scheduled to report fourth-quarter 2017 results on Jan 18 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 gained 2.7% over the past three months but lagged the industry's average growth of 3.6%. The upside is expected to continue as IBM is poised to beat our earnings estimate as per the Zacks methodology and has attractive fundamentals.
Inside Our Methodology
IBM has a Zacks Rank #3 (Hold) and an Earnings ESP of +0.24%, indicating reasonable chances of its beating estimates this quarter. According to our surprise prediction methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP may lead to an earnings beat. A Zacks Rank #4 or 5 (Sell-rated) is best avoided going into the 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 earnings track record is respectable, with an average earnings surprise of 3.39% for the last four quarters. The Q4 Zacks Consensus Estimate reflects modest earnings growth of 3.19% from the year-ago quarter. IBM also projects year-over-year revenue growth of 0.87%, signaling an end to the declining revenue streak. Though IBM has ugly Growth and Momentum Style Score of D and F, respectively, it boasts a top Value Style Score of A and a solid Industry Rank in the top 34%.
According to the analysts compiled by Zacks, IBM has an average target price of $166.71 with 26% of the analysts having a Strong Buy or a Buy rating and 58% having a Hold rating ahead of earnings.
What to Watch?
Investors will be closely watching whether the company's turnaround story, with the first quarterly revenue growth in many years, will materialize in the fourth quarter. Strategic areas like cloud computing, security software, data analytics and artificial intelligence as well as the new wave of blockchain technology are acting as a significant tailwind to the company's top line.
