IBM Shares Surge as Company Delivers Solid Q4 Report

Shares of tech giant IBM were headed higher this week ahead of the company reporting a 6% revenue jump in the fourth quarter.

This is an impressive set of revenue numbers for IBM, remarked Evercore ISI’s Amit Daryanani.

Shares of IBM soared as much as 7% in extended trading but ironically lost most of their gains Monday after the software and services company announced the revenue increase, which had even surpassed expectations.

IBM executives have been telling investors to look for mid-single digit revenue growth.
For the quarter, IBM reported earnings of $3.35 a share adjusted. Analysts according to Refinitiv had been expecting $3.30 per share adjusted.

Revenue at $16.7 billion was also ahead of the $15.9 billion that had been expected by analysts, per Refinitiv.

It was also during the fourth quarter that IBM spun out its managed infrastructure services unit during the quarter into a publicly held company named Kyndryl.

For the company’s continuing operations, revenue rose 6% from a year earlier, the company said a statement. Part of the growth comes from sales to Kyndryl.

Net income in the fourth quarter jumped 72% from a year earlier to $2.33 billion increased, while gross margin narrowed to 56.9% from 58.9%.

Arvind Krishna, IBM’s CEO, had reiterated mid-single-digit growth goal on a conference call with analysts and said to expect between $10 billion and $10.5 billion in free cash flow for 2022.

“I’ll use the word demographics on the skill shortage that is endemic in technology now,” he said. And that is sort of playing in. By the way, I don’t believe that the skill shortage is because of COVID. I do believe COVID may have exacerbated or created a pull-in of those demographics, but those I think are going to last us for the decade.”

“M&A has to have an economic benefit for our company and our shareholders,” Krishna said. “As valuations come down, clearly some targets may become more approachable that were not previously approachable. And as I said before, look, we have a little over $20 billion of flexibility over the next three years. So I’d just leave it at that. That’s our total flexibility. As prices come down, certainly more things come within range.”

As of the close on Monday, IBM shares are down 4% since the start of the year, while the S&P 500 is down 8%.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.