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Will Healthy Consulting Revenues Boost IBM's Q4 Earnings?
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International Business Machines Corporation (IBM - Free Report) is scheduled to report fourth-quarter 2023 results on Jan 24, after the closing bell. The company is expected to have registered higher revenues from the consulting segment, backed by rising demand for technology consulting services across various industries.
Factors at Play
The Consulting segment comprises Business Transformation, Technology Consulting and Application Operations. It provides consulting and application management services that offer value and innovation to clients by leveraging industry, technology and business strategy, and process know-how.
During the quarter, IBM and KPMG LLP extended their collaboration to assist enterprises in the energy and utilities industry with SAP S/4HANA implementation for business transformation. The partnership intends to minimize risks associated with cloud ERP (enterprise resource planning) projects by leveraging IBM Consulting and KPMG's complementary expertise in SAP technology, cross-sector business processes, regulatory compliance, risk management, finance and tax considerations. IBM also introduced a cloud database solution in collaboration with Amazon to streamline the management of AI-driven data workloads.
IBM inked a strategic agreement with Riyadh Air. Per the deal, IBM Consulting will provide core technological capabilities and facilitate the implementation of various airline industry solutions spanning from security, infrastructure and data platforms. IBM will also offer program and technical governance, project management, quality assurance, communications management and training. These are likely to have driven incremental revenues in the Consulting segment in the fourth quarter.
During the December quarter, IBM also extended its collaboration with Amazon Web Services ("AWS") to deliver solutions and services powered by generative AI. The advanced capabilities will streamline the management of the entire cloud value chain, such as IT Ops, automation and platform engineering.
IBM Consulting is working to modernize contact center operations by harnessing generative AI. The solution also makes it easier to switch between chatbots and live agents. The detailed summary enables agents to speed up resolution and improve customer experience. Moreover, IBM Consulting is planning to incorporate AWS generative AI services into IBM Consulting Cloud Accelerator to expedite the enterprise's cloud transformation process.
IBM has introduced Threat Detection and Response Services, a new comprehensive suite of AI-powered technologies designed to augment an organization’s cyber defense capabilities. Leveraging AI models, this solution effectively analyses security data and offers 24/7 monitoring and investigation across hybrid cloud environments. These are likely to be reflected in the upcoming results.
Key Developments in Q4
In the quarter under review, IBM entered into an agreement with the NATO Communications and Information Agency to bolster NATO's cybersecurity defenses by enhancing security oversight and managing assets across all NATO networks. Per the agreement, IBM Consulting Cybersecurity Services will provide a customized Asset, Configuration, Patching and Vulnerability Management Service to NATO starting January 2024.
Overall Expectations
The Zacks Consensus Estimate for Consulting revenues is pegged at $5,069.45 million, indicating growth from $4,770 million in the year-ago quarter. Our estimate for revenues from Consulting is pegged at $5,016.5 million, implying 5.2% growth year over year.
The Zacks Consensus Estimate for total revenues for the company stands at $17,162 million. It generated revenues of $16,690 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $3.75 per share, indicating growth from $3.60 in the year-earlier quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for IBM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.08%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
International Business Machines Corporation Price and EPS Surprise
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
The Earnings ESP for NVIDIA Corporation (NVDA - Free Report) is +3.68% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Feb 28.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +1.46% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Feb 1.
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Will Healthy Consulting Revenues Boost IBM's Q4 Earnings?
International Business Machines Corporation (IBM - Free Report) is scheduled to report fourth-quarter 2023 results on Jan 24, after the closing bell. The company is expected to have registered higher revenues from the consulting segment, backed by rising demand for technology consulting services across various industries.
Factors at Play
The Consulting segment comprises Business Transformation, Technology Consulting and Application Operations. It provides consulting and application management services that offer value and innovation to clients by leveraging industry, technology and business strategy, and process know-how.
During the quarter, IBM and KPMG LLP extended their collaboration to assist enterprises in the energy and utilities industry with SAP S/4HANA implementation for business transformation. The partnership intends to minimize risks associated with cloud ERP (enterprise resource planning) projects by leveraging IBM Consulting and KPMG's complementary expertise in SAP technology, cross-sector business processes, regulatory compliance, risk management, finance and tax considerations. IBM also introduced a cloud database solution in collaboration with Amazon to streamline the management of AI-driven data workloads.
IBM inked a strategic agreement with Riyadh Air. Per the deal, IBM Consulting will provide core technological capabilities and facilitate the implementation of various airline industry solutions spanning from security, infrastructure and data platforms. IBM will also offer program and technical governance, project management, quality assurance, communications management and training. These are likely to have driven incremental revenues in the Consulting segment in the fourth quarter.
During the December quarter, IBM also extended its collaboration with Amazon Web Services ("AWS") to deliver solutions and services powered by generative AI. The advanced capabilities will streamline the management of the entire cloud value chain, such as IT Ops, automation and platform engineering.
IBM Consulting is working to modernize contact center operations by harnessing generative AI. The solution also makes it easier to switch between chatbots and live agents. The detailed summary enables agents to speed up resolution and improve customer experience. Moreover, IBM Consulting is planning to incorporate AWS generative AI services into IBM Consulting Cloud Accelerator to expedite the enterprise's cloud transformation process.
IBM has introduced Threat Detection and Response Services, a new comprehensive suite of AI-powered technologies designed to augment an organization’s cyber defense capabilities. Leveraging AI models, this solution effectively analyses security data and offers 24/7 monitoring and investigation across hybrid cloud environments. These are likely to be reflected in the upcoming results.
Key Developments in Q4
In the quarter under review, IBM entered into an agreement with the NATO Communications and Information Agency to bolster NATO's cybersecurity defenses by enhancing security oversight and managing assets across all NATO networks. Per the agreement, IBM Consulting Cybersecurity Services will provide a customized Asset, Configuration, Patching and Vulnerability Management Service to NATO starting January 2024.
Overall Expectations
The Zacks Consensus Estimate for Consulting revenues is pegged at $5,069.45 million, indicating growth from $4,770 million in the year-ago quarter. Our estimate for revenues from Consulting is pegged at $5,016.5 million, implying 5.2% growth year over year.
The Zacks Consensus Estimate for total revenues for the company stands at $17,162 million. It generated revenues of $16,690 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $3.75 per share, indicating growth from $3.60 in the year-earlier quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for IBM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.08%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
International Business Machines Corporation Price and EPS Surprise
International Business Machines Corporation price-eps-surprise | International Business Machines Corporation Quote
Zacks Rank: IBM currently has a Zacks Rank #2.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
InterDigital, Inc. (IDCC - Free Report) is set to release quarterly numbers on Feb 15. It has an Earnings ESP of +1.93% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for NVIDIA Corporation (NVDA - Free Report) is +3.68% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Feb 28.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +1.46% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Feb 1.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.