There's a big difference in what IBM (IBM) reported in its headline number for its fiscal 2nd quarter after the bell Wednesday compared with the way Zacks reads the data: IBM reported earnings per share of $3.91 in the quarter, but without including a major, $1 billion workforce rebalancing charge. Including this charge, IBM reported earnings of $3.22 per share.
That's a pretty big difference. And while many companies — particularly in the tech industry — often report non-GAAP headlines, not including stock-based compensation, etc., it's not often the special item(s) in a quarter take a company's bottom-line from a beat to a miss. Add to that IBM's miss on the revenue side — $24.9 billion versus $25.3 billion expected — and we show Big Blue missing on both ends of its second quarter report.
Even that's really not too big a deal; when you're counting tens of billions in sales per quarter, a few million here or there can be seen as relatively in-line overall. But looked at from the point of view that IBM had posted positive surprise after positive surprise on the EPS side every quarter year after year, the fact that this is the second moderate miss in a row may raise an eyebrow or two — especially considering shares are still trading up around their all-time highs.
Clearly the after-market is unfazed by this. IBM is trading back up at $200 per share, up roughly 3% just since the earnings announcement. And this was after a moderately up regular-trading day.
The company certainly has a lot to look forward to: services overall were down 1% but services signings rose 20%, indicating better things to come. Software sales were up 5%. Its System Z mainframe server should help bolster its hardware business. Also, IBM rose its guidance for fiscal 2013 slightly, but this again excludes the big workforce rebalancing charge. That said, pull the band-aid off quickly and it won't hurt as much later.
Analysts have been mixed on IBM lately: there is an upward revision for fiscal 2013 over the past couple months, and even more for fiscal 2014, but there has been an overall downward bias with respect to revisions. Pre-earnings, IBM has a Zacks Rank #3 (Hold).
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