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International Business Machines Corp (IBM - Analyst Report) is set to announce its first quarter 2013 results on Apr 18. In the last reported quarter, IBM surpassed the Zacks Consensus Estimate by 2.67%. Let’s see how things are shaping up for this announcement.

Factors this Past Quarter

IBM’s top line beat the Zacks Consensus Estimate in the fourth quarter after lagging for five consecutive quarters. The software segment continued its growth on a year-over-year basis while the Services and Hardware/System & Technology segment disappointed.

Despite sluggish revenues from Hardware/System & Technology, IBM gained significant market share during the quarter, primarily driven by 350 new contracts from customers previously associated with Hewlett-Packard and Oracle (ORCL - Analyst Report).

Moreover, margin expansion and lower-than-expected operating expenses positively impacted earnings per share in the quarter.

IBM forecasts fiscal 2013 operating earnings of at least $16.70 per share, an estimated 9.5% increase from $15.25 reported in 2012. IBM continues to expect the effective tax-rate to be around 25% for 2013.

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 Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) 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 Most Accurate estimate stands at $3.05 while the Zacks Consensus Estimate is at $3.06. That is a difference of -0.33%.

Zacks Rank #3 (Hold): IBM’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

LinkedIn Corp (LNKD - Analyst Report) has an Earnings ESP of +300.0% and a Zacks Rank #2 (Buy). (AMZN) has an Earnings ESP of +100.0% and Zacks Rank #3 (Hold).

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