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From Punch Cards to Cloud: IBM's 114-Year Evolution
It’s no secret that tech stocks have been performing well this year.
With the sector roaring back from the April lows, top themes such as quantum computing, hybrid cloud, and storage solutions have driven outperformance.
One stock that boasts a strong presence in these areas is tech powerhouse International Business Machines. IBM is poised to benefit from strong demand for hybrid cloud and AI, propelling growth in its Software and Consulting segments.
The company’s progress is expected to be driven primarily by analytics, cloud computing, and security over the long-term. Its core technology platform for AI capabilities – Watsonx – is gaining significant market traction across industries.
The Evolution of IBM: A Century-Plus Journey
Since its incorporation as the Computing-Tabulating-Recording Company in 1911, IBM has gradually evolved as a provider of cloud and data platforms. In particular, the company’s Red Hat acquisition boosted its competitive position in the hybrid cloud market. In addition, the company provides advanced information technology solutions, computer systems, quantum computing solutions, enterprise software, storage systems and microelectronics.
IBM is benefiting from a surge in demand for dynamic and complex infrastructure strategies, which have led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management. The integration of HashiCorp’s cloud software capabilities has further bolstered IBM’s hybrid multi-cloud approach.
A combination of an elite business mix, improving operating leverage and increased investment in growth opportunities will likely drive profitability well into the future. IBM's research and development (R&D) initiatives set it apart from its peers. On an annual basis, the company invests around 7-8% on R&D for reaping high-growth and high-value opportunities.
In addition, IBM continues to push the boundaries of quantum technology to explore solutions to complex problems beyond the reach of classical computing. One of the first to make waves in the quantum space several decades ago, IBM has now generated around $1 billion in bookings related to its quantum computing business.
The Zacks Rundown
A Zacks Rank #2 (Buy) stock, IBM (IBM - Free Report) is part of the Zacks Computer – Integrated Systems industry group, which currently ranks in the top 9% out of approximately 250 industries. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market throughout the remainder of this year:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
The legacy tech giant boasts a remarkable track record in terms of beating earnings estimates. IBM has delivered a trailing four-quarter average earnings surprise of 6.3%, and hasn’t missed the EPS mark since early 2023.
Image Source: Zacks Investment Research
IBM is set to report third-quarter earnings results on Wednesday after the closing bell. Analysts covering the company remain in agreement as estimates have held steady over the past 60 days. The Q3 Zacks Consensus EPS Estimate stands at $2.43 per share, reflecting 5.7% growth relative to the year-ago period. Revenues are projected to jump 7.5% to $16.1 billion.
Image Source: Zacks Investment Research
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) indicator seeks to find companies that have recently seen positive earnings estimate revision activity. This more recent information has proven to be very useful in finding positive earnings surprises, giving investors a leg up during earnings season. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
IBM is currently a Zacks Rank #2 (Buy) stock and boasts a +0.14% Earnings ESP. Another beat may be in the cards when the company reports its Q3 results tomorrow after the close.
Disclosure: IBM is a current holding in the Zacks Income Investor portfolio.
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From Punch Cards to Cloud: IBM's 114-Year Evolution
It’s no secret that tech stocks have been performing well this year.
With the sector roaring back from the April lows, top themes such as quantum computing, hybrid cloud, and storage solutions have driven outperformance.
One stock that boasts a strong presence in these areas is tech powerhouse International Business Machines. IBM is poised to benefit from strong demand for hybrid cloud and AI, propelling growth in its Software and Consulting segments.
The company’s progress is expected to be driven primarily by analytics, cloud computing, and security over the long-term. Its core technology platform for AI capabilities – Watsonx – is gaining significant market traction across industries.
The Evolution of IBM: A Century-Plus Journey
Since its incorporation as the Computing-Tabulating-Recording Company in 1911, IBM has gradually evolved as a provider of cloud and data platforms. In particular, the company’s Red Hat acquisition boosted its competitive position in the hybrid cloud market. In addition, the company provides advanced information technology solutions, computer systems, quantum computing solutions, enterprise software, storage systems and microelectronics.
IBM is benefiting from a surge in demand for dynamic and complex infrastructure strategies, which have led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management. The integration of HashiCorp’s cloud software capabilities has further bolstered IBM’s hybrid multi-cloud approach.
A combination of an elite business mix, improving operating leverage and increased investment in growth opportunities will likely drive profitability well into the future. IBM's research and development (R&D) initiatives set it apart from its peers. On an annual basis, the company invests around 7-8% on R&D for reaping high-growth and high-value opportunities.
In addition, IBM continues to push the boundaries of quantum technology to explore solutions to complex problems beyond the reach of classical computing. One of the first to make waves in the quantum space several decades ago, IBM has now generated around $1 billion in bookings related to its quantum computing business.
The Zacks Rundown
A Zacks Rank #2 (Buy) stock, IBM (IBM - Free Report) is part of the Zacks Computer – Integrated Systems industry group, which currently ranks in the top 9% out of approximately 250 industries. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market throughout the remainder of this year:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
The legacy tech giant boasts a remarkable track record in terms of beating earnings estimates. IBM has delivered a trailing four-quarter average earnings surprise of 6.3%, and hasn’t missed the EPS mark since early 2023.
Image Source: Zacks Investment Research
IBM is set to report third-quarter earnings results on Wednesday after the closing bell. Analysts covering the company remain in agreement as estimates have held steady over the past 60 days. The Q3 Zacks Consensus EPS Estimate stands at $2.43 per share, reflecting 5.7% growth relative to the year-ago period. Revenues are projected to jump 7.5% to $16.1 billion.
Image Source: Zacks Investment Research
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) indicator seeks to find companies that have recently seen positive earnings estimate revision activity. This more recent information has proven to be very useful in finding positive earnings surprises, giving investors a leg up during earnings season. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
IBM is currently a Zacks Rank #2 (Buy) stock and boasts a +0.14% Earnings ESP. Another beat may be in the cards when the company reports its Q3 results tomorrow after the close.
Disclosure: IBM is a current holding in the Zacks Income Investor portfolio.