International Business Machines (IBM - Free Report) is scheduled to report first-quarter 2018 results on Apr 17 after market close. Being the world’s largest computer-services provider, it is worth taking a look at its fundamentals ahead of results.
IBM has gained 3.1% so far this year but slightly lagged the industry’s average growth of 3.5%. The upside might be limited as IBM is less likely to beat the earnings estimate but has attractive fundamentals.
Inside Our Methodology
IBM has a Zacks Rank #3 (Hold) and an Earnings ESP of -1.83%, indicating lower chances of its beating estimates this quarter. According to our surprise prediction methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP may lead to an earnings beat. A Zacks Rank #4 or 5 (Sell rated) is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The earnings track is respectable, with an average earnings surprise of 2.83% for the last four quarters. The Q1 Zacks Consensus Estimate reflects modest earnings growth of 0.42% from the year-ago quarter. IBM also projects year-over-year revenue growth of 3.06%, signaling another quarter of revenue growth. Additionally, the stock saw positive earnings estimate revision of 26 cents over the past 90 days, for the first quarter. Though IBM has a Growth and Momentum Style Score of C each, it boasts a top Value Style Score of A and belongs to a top-ranked Zacks industry (top 17%) (read: Play IBM Revenue Growth After 23 Quarters With These ETFs).
According to the analysts compiled by Zacks, IBM has an average target price of $176.23 with 29% of the analysts having a Strong Buy or a Buy rating and 65% having a Hold rating ahead of earnings. This represents more than 11% upside form the current price.
What to Watch?
Investors are keen to watch the second consecutive quarter of revenue growth. Strategic areas like cloud computing, security software, data analytics and artificial intelligence as well as the new wave of blockchain technology are acting as a significant tailwinds to the company’s top line (read: Blockchain ETFs: What Investors Need to Know).
ETFs in Focus
Given this, ETFs having the highest allocation to this this tech giant will be in focus going into its earnings announcement. These funds could be potential movers if IBM surprises the market:
First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report)
This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $863.9 million in its asset base while trading in volume of around 80,000 shares per day. It charges 50 bps in annual fees and holds about 95 securities in its basket. Of these firms, IBM takes the second spot, making up roughly 8.2% of the assets. In terms of industrial exposure, the fund allocates about 29.2% of the portfolio in semiconductor and semiconductor equipment, followed by software (14.3%), technology hardware, storage & peripherals (13.9%), and diversified telecom services (11.9%) (read: Invest Like Warren Buffett With These ETFs).
PowerShares Dow Jones Industrial Average Dividend Portfolio (DJD - Free Report)
This ETF offers exposure to high-yielding companies included in the Dow Jones Industrial Average by tracking the Dow Jones Industrial Average Yield Weighted. It holds 30 stocks in it basket, with IBM occupying the fourth position with 5.2% allocation. Information technology, healthcare, industrials, and consumer staples are the top four sectors. DJD has been able to manage assets worth $16.5 million while trades in a volume of 9,000 shares a day on average. It charges 30 bps in annual fees and has a Zacks ETF Rank #3.
WBI Power Factor High Dividend ETF (WBIY - Free Report)
This product tracks the Solactive Power Factor High Dividend Index and focuses on companies that generate the highest dividend yield with a deep value bias and multi-factor fundamental analysis to confirm quality. Holding 51 stocks in its portfolio, IBM is the third firm with 5.1% share. The ETF has the largest allocation to consumer discretionary sector at 27% while utilities, telecom, and technology round off the next three spots. It has accumulated $45.7 million in its asset base and trades in average daily volume of 8,000 shares. Expense ratio comes in at 0.70%.
Schwab U.S. Dividend Equity ETF (SCHD - Free Report)
With AUM of $7.3 billion, this product offers exposure to the 113 high dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. IBM occupies the fourth position in the basket with 4.6% of the portfolio. Consumer staples and information technology are the top two sectors with nearly 22% share each. The fund trades in solid volume of more than 827,000 shares a day and is one of the low cost choices in the dividend space, charging 7 bps in fees per year. It has a Zacks ETF Rank #3 (read: Stocks and ETFs with Juicy Dividend Yields).
Amplify Transformational Data Sharing ETF (BLOK - Free Report)
This is an actively managed ETF providing investors global exposure to a basket of the leading companies engaged in advancing the blockchain-based technology and other distributed ledger technologies. Holding 50 stocks in its basket, IBM takes the sixth spot at 4.5%. From an industry look, Internet makes up for 27% share, followed by semiconductors (17.5%), software (14.3%), computers (11.2%) and banks (10.7%). The ETF has amassed $173.7 million in its assets since its launch on Jan 17 and trades in a solid volume of 471,000 shares. This new fund has an expense ratio of 0.70% (read: Top ETFs Launches of 2018 in Terms of AUM).
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