Here’s What Analysts Think Will Happen Next
Investors in International Business Machines Corporation (NYSE:IBM) had a good week, as its shares rose 3.6% to close at US$192 following the release of its second-quarter results. International Business Machines reported US$16b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.96 beat expectations, being 9.0% higher than what the analysts expected. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Check out our latest analysis for International Business Machines
Taking into account the latest results, International Business Machines’ 20 analysts currently expect revenues in 2024 to be US$63.2b, approximately in line with the last 12 months. Statutory earnings per share are forecast to decrease 2.6% to US$8.91 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$63.1b and earnings per share (EPS) of US$8.64 in 2024. So the consensus seems to have become somewhat more optimistic on International Business Machines’ earnings potential following these results.
There’s been no major changes to the consensus price target of US$185, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock’s valuation. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on International Business Machines, with the most bullish analyst valuing it at US$222 and the most bearish at US$130 per share. This shows there is still a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. For example, we noticed that International Business Machines’ rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 2.6% growth to the end of 2024 on an annualised basis. That is well above its historical decline of 3.7% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 8.7% per year. So although International Business Machines’ revenue growth is expected to improve, it is still expected to grow slower than the industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards International Business Machines following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it’s tracking in line with expectations. Although our data does suggest that International Business Machines’ revenue is expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for International Business Machines going out to 2026, and you can see them free on our platform here..
We don’t want to rain on the parade too much, but we did also find 1 warning sign for International Business Machines that you need to be mindful of.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]
link
