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IBM Beats Q2 Earnings Estimates on Hybrid Cloud & AI Demand
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International Business Machines Corporation (IBM - Free Report) reported solid second-quarter 2022 results, wherein both the bottom and the top lines beat the Zacks Consensus Estimate.
Net Income
On a GAAP basis, net income from continuing operations was $1,465 million or $1.61 per share compared with $810 million or 90 cents per share in the year-ago quarter. The improvement was primarily attributable to higher aggregate revenues.
Non-GAAP net income was $2.31 per share compared with $1.61 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 2 cents.
International Business Machines Corporation Price, Consensus and EPS Surprise
Quarterly total revenues increased 9.3% year over year to $15,535 million, backed by strong demand for hybrid cloud and AI, driving growth in Software and Consulting. The top line surpassed the consensus estimate of $15,120 million.
Gross profit was $8,290 million compared with $7,852 million in the prior-year quarter, resulting in respective gross margins of 53.4% and 55.2%. Total expenses declined to $6,568 million from $6,940 million.
Segmental Performance
Software: Revenues improved to $6,166 million from $5,795 million, driven by growth in Hybrid Platform & Solutions and Transaction Processing. Segment pre-tax income was $1,375 million compared with $1,059 million in the year-ago quarter for respective margins of 22.3% and 18.3%. The company is witnessing healthy hybrid cloud adoption by clients, adding 250 clients in the second quarter alone, bringing the tally of hybrid cloud clients to more than 4,000.
Consulting: Revenues were $4,809 million, up from $4,378 million, led by a strong demand profile, growing revenues and signings at double-digit rates across all business lines and regions. Segment pre-tax income was $343 million compared with $270 million in the year-ago quarter for respective margins of 7.1% and 6.2%.
Infrastructure: Revenues were $4,235 million, up from $3,560 million, due to higher Hybrid Infrastructure revenues and the launch of z16 mainframe – an open, agile platform that integrates into a hybrid cloud environment with industry-leading security, data privacy and latency. Segment pre-tax income was $757 million compared with $489 million in the year-ago quarter for respective margins of 17.9% and 13.7%.
Financing: Revenues were $146 million, down from $209 million due to the challenging macroeconomic environment. Segment pre-tax income was $102 million compared with $131 million in the year-ago quarter for respective margins of 69.7% and 63%.
Cash Flow & Liquidity
During the second quarter, IBM generated $1,321 million in cash from operations compared with $2,625 million in the year-ago quarter, bringing the respective tallies for the first half of 2022 and 2021 to $4,569 million and $7,539 million. Free cash flow was $2,091 million for the quarter, up from $1,037 million in the prior-year period. As of Jun 30, 2022, the company had $7,034 million in cash and cash equivalents with $44,328 million of long-term debt.
Outlook
For full-year 2022, the company expects revenue growth at the high end of the mid-single-digit range. Free cash flow is estimated to be $10 billion, slightly narrow from earlier projections of $10-$10.5 billion due to the impact of dollar strength and winding down of business operations in Russia.
Sierra Wireless has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 223.7%, on average, in the trailing four quarters. Over the past year, the stock has gained 43.1%. Earnings estimates for the current year have moved up 616.7% since July 2021. Sierra Wireless continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.
InterDigital, Inc. (IDCC - Free Report) , carrying a Zacks Rank #2, is another key pick for investors. It has a long-term earnings growth expectation of 15% and delivered a stellar earnings surprise of 141.1%, on average, in the trailing four quarters. Earnings estimates for the current year have moved up 49.5% since July 2021.
InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and ability to penetrate different markets are impressive.
Aviat Networks, Inc. (AVNW - Free Report) sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 15.7% upward since July 2021.
Aviat Networks pulled off a trailing four-quarter earnings surprise of 17.4%, on average. It has soared 161.2% in the past two years.
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IBM Beats Q2 Earnings Estimates on Hybrid Cloud & AI Demand
International Business Machines Corporation (IBM - Free Report) reported solid second-quarter 2022 results, wherein both the bottom and the top lines beat the Zacks Consensus Estimate.
Net Income
On a GAAP basis, net income from continuing operations was $1,465 million or $1.61 per share compared with $810 million or 90 cents per share in the year-ago quarter. The improvement was primarily attributable to higher aggregate revenues.
Non-GAAP net income was $2.31 per share compared with $1.61 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 2 cents.
International Business Machines Corporation Price, Consensus and EPS Surprise
International Business Machines Corporation price-consensus-eps-surprise-chart | International Business Machines Corporation Quote
Quarter Details
Quarterly total revenues increased 9.3% year over year to $15,535 million, backed by strong demand for hybrid cloud and AI, driving growth in Software and Consulting. The top line surpassed the consensus estimate of $15,120 million.
Gross profit was $8,290 million compared with $7,852 million in the prior-year quarter, resulting in respective gross margins of 53.4% and 55.2%. Total expenses declined to $6,568 million from $6,940 million.
Segmental Performance
Software: Revenues improved to $6,166 million from $5,795 million, driven by growth in Hybrid Platform & Solutions and Transaction Processing. Segment pre-tax income was $1,375 million compared with $1,059 million in the year-ago quarter for respective margins of 22.3% and 18.3%. The company is witnessing healthy hybrid cloud adoption by clients, adding 250 clients in the second quarter alone, bringing the tally of hybrid cloud clients to more than 4,000.
Consulting: Revenues were $4,809 million, up from $4,378 million, led by a strong demand profile, growing revenues and signings at double-digit rates across all business lines and regions. Segment pre-tax income was $343 million compared with $270 million in the year-ago quarter for respective margins of 7.1% and 6.2%.
Infrastructure: Revenues were $4,235 million, up from $3,560 million, due to higher Hybrid Infrastructure revenues and the launch of z16 mainframe – an open, agile platform that integrates into a hybrid cloud environment with industry-leading security, data privacy and latency. Segment pre-tax income was $757 million compared with $489 million in the year-ago quarter for respective margins of 17.9% and 13.7%.
Financing: Revenues were $146 million, down from $209 million due to the challenging macroeconomic environment. Segment pre-tax income was $102 million compared with $131 million in the year-ago quarter for respective margins of 69.7% and 63%.
Cash Flow & Liquidity
During the second quarter, IBM generated $1,321 million in cash from operations compared with $2,625 million in the year-ago quarter, bringing the respective tallies for the first half of 2022 and 2021 to $4,569 million and $7,539 million. Free cash flow was $2,091 million for the quarter, up from $1,037 million in the prior-year period. As of Jun 30, 2022, the company had $7,034 million in cash and cash equivalents with $44,328 million of long-term debt.
Outlook
For full-year 2022, the company expects revenue growth at the high end of the mid-single-digit range. Free cash flow is estimated to be $10 billion, slightly narrow from earlier projections of $10-$10.5 billion due to the impact of dollar strength and winding down of business operations in Russia.
Zacks Rank & Stocks to Consider
IBM currently carries a Zacks Rank #4 (Sell). A better-ranked stock in the broader industry is Sierra Wireless, Inc. , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sierra Wireless has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 223.7%, on average, in the trailing four quarters. Over the past year, the stock has gained 43.1%. Earnings estimates for the current year have moved up 616.7% since July 2021. Sierra Wireless continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.
InterDigital, Inc. (IDCC - Free Report) , carrying a Zacks Rank #2, is another key pick for investors. It has a long-term earnings growth expectation of 15% and delivered a stellar earnings surprise of 141.1%, on average, in the trailing four quarters. Earnings estimates for the current year have moved up 49.5% since July 2021.
InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and ability to penetrate different markets are impressive.
Aviat Networks, Inc. (AVNW - Free Report) sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 15.7% upward since July 2021.
Aviat Networks pulled off a trailing four-quarter earnings surprise of 17.4%, on average. It has soared 161.2% in the past two years.