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Wall Street analysts provided a mixed reaction to IBM ‘s (NYSE:IBM) latest earnings release, which saw it beat analyst consensus expectations, with profit coming in at $3.60 per share on revenue of $16.7 billion.
Stifel analysts cut their price target on IBM to $150 from $158 following the release, stating that the company’s stable revenue trend was overshadowed by its “sluggish FCF guide.” Stifel, which maintained a Buy rating on the stock, said that foreign exchange headwinds abated over the past three months, which did not translate into an FCF tailwind, but they assumed the benefit would be reinvested or set aside as a potential cushion if needed.
BMO Capital’s analysts lifted the firm’s price target on IBM to $155, as they believe the company delivered a “reasonable” quarter with solid revenue growth and FY23 growth guidance, particularly in consulting. However, they noted that the company reported lackluster margins/FCF and guided margins/FCF. “With more confidence in IBM’s Consulting guide, we could consider becoming more constructive, though we still question Consulting bookings growth potential in a weaker macro,” the analysts wrote.
Similarly, Citi analysts said signings and revenue growth guidance for IBM were encouraging, but the firm’s margin expansion and FCF guidance disappointed. They maintained a Neutral rating on the stock, raising the price target to $145 from $140, stating that IBM’s consulting signings are encouraging, but operating margins and FCF missed expectations and FX is now expected to be a slight headwind. Therefore, the Citi analysts said the firm’s estimates “undergo modest negative revisions.”
