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International Business Machines Corp. (IBM - Analyst Report) is set to report fiscal first-quarter 2014 results on Apr 16. Last quarter, the company reported a positive surprise of 2.0%. Moreover, IBM posted an average positive earnings surprise of 1.12% over the past four quarters.

Let us see how things are shaping up for the company in this quarter.

Growth Factors this Past Quarter

IBM has missed the Zacks Consensus Estimate for revenues over the last four quarters. The first quarter is seasonally weak for the company. Hence, revenue growth will be eagerly watched by investors. Currently, the Zacks Consensus Estimate for the first quarter is pegged at $23.02 billion.

The lack of revenue growth makes it difficult to achieve the earnings growth. IBM has been relying on cost savings to drive earnings growth over the last three quarters. The current Zacks Consensus Estimate of $2.54 per share is lower than $3.06 reported by IBM in the year-ago quarter.

We believe IBM needs to accelerate revenue growth from emerging markets in order to boost its overall sales. The divestiture of the low-end server and customer care business will improve profitability.

Nevertheless, intensifying competition from SAP AG (SAP - Analyst Report) and Oracle (ORCL - Analyst Report) remains a major headwind.

Earnings Whispers?

Our proven model does not conclusively show that IBM is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The difference between Most Accurate estimate and the Zacks Consensus Estimate stands at 0.79%.

Zacks Rank: IBM has a Zacks Rank #4 (Sell) which when combined with an ESP of 0.79% makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement.

Other Stocks to Consider

Here is one you may want to consider as our model shows that it has the right combination of elements to post an earnings beat in the upcoming quarter.

Amazon.com (AMZN - Analyst Report), with Earnings ESP of +4.76% and a Zacks Rank #2 (Buy).

Read the Full Research Report on AMZN
Read the Full Research Report on IBM
Read the Full Research Report on SAP
Read the Full Research Report on ORCL


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