IBM is an interesting company in its perception vs. its reality. Most people think of old 1970s mainframes and tech company well past its prime. How cares about IBM when you have Google, Apple, and Amazon making break-thrus and large growth?
To sum up IBM...
10 year annual EPS growth: +13.4%
10 year annual dividend growth: +19.4%
Payout Ratio: 23%
5 year annual shares repurchased: 4.6%
Forward P/E: 10
Company Overview
Company Fundamentals
Fastgraphs Review: IBM has lagged the market and pulled back last year. Its more undervalued now then its been in the past 10 years. Thats one of the big reasons I bought IBM. The dividend yield is low but not low enough that hte dividend growth rate cannot make up for it.
Earning Report Notes
Company and Industry specific commonly used acronyms and terms
None
Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
To sum up IBM...
10 year annual EPS growth: +13.4%
10 year annual dividend growth: +19.4%
Payout Ratio: 23%
5 year annual shares repurchased: 4.6%
Forward P/E: 10
INTERNATIONAL BUSINESS MACHINES (IBM)
Last Updated: Q4-2013
Description: International Business Machines Corporation (IBM) is an information technology (IT) company. IBM operates in five segments: Global Technology Services (GTS), Global Business Services (GBS), Software, Systems and Technology and Global Financing. GTS provides IT infrastructure services and business process services.
How do they make money: Offering information management and services to high end and business customers.
Key Brands: Watson, IBM Mainframes, SmartPlanet
Company Overview
Services: 54% of revenue (Q4-2013)
Global Technology Services (GTS), 35% total company revenue
Consulting
Cloud: 40 centers in 15 countries
Global Business Services (GBS), 18% total company revenue
Smarter Planet
Software: 29% of revenue
Smarter Commerce
WebSphere
Systems and Technology: 15%
Mainframe
Storage (including Flash)
Global Financing: 2% ?
Leverage: x7
Debt: $27.5b (Non finance debt $12.2b for $39.7b total)
EPS across the Quarters: IBM does not have consistent EPS and cash flow Q/Q
Q1: 18% yearly EPS
Q4: 54% yearly cash flow
Tax Rate: 23% (Q4-2013)
Risks
Pension: IBM has a legacy pension plan that will need funding. Many companies have difficulties funding.
Mitigation: Q4 2013 comments are that it is “well funded” and “cash requirements remain stable”
Old technology company: IBM is known for its mainframes and being a tech company for over 100 years. Tech moves fast and companies have to innovate faster than other sectors.
Mitigation: IBM’s new initiatives are growing at 20% rates (Cloud, SmartPlanet, WebSphere). IBM is obviously aware that old tech and old services drop off quick and new ones take off fast.
Company Fundamentals
Fastgraphs Review: IBM has lagged the market and pulled back last year. Its more undervalued now then its been in the past 10 years. Thats one of the big reasons I bought IBM. The dividend yield is low but not low enough that hte dividend growth rate cannot make up for it.
Company Stats
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013e
|
5y Avg
|
10y Avg
|
Share Price
|
$98.58
|
$82.20
|
$97.15
|
$108.10
|
$84.16
|
$130.90
|
$146.76
|
$183.88
|
$191.55
|
$191.11
|
$168.84
|
$131.44
|
EPS
|
4.93
|
4.87
|
6.11
|
7.18
|
8.93
|
10.01
|
11.52
|
13.06
|
14.37
|
16.89
|
13.17
|
9.787
|
EPS Growth
|
65.8%
|
-1.22%
|
25.46%
|
17.51%
|
24.37%
|
12.09%
|
15.08%
|
13.37%
|
10.03%
|
17.54%
|
13.62%
|
20.00%
|
P/E
|
20.00
|
16.88
|
15.90
|
15.06
|
9.42
|
13.08
|
12.74
|
14.08
|
13.33
|
11.31
|
12.91
|
14.18
|
P/B
|
3.8
|
4
|
5.4
|
7.6
|
4.8
|
5
|
6.5
|
4.5
|
3.6
|
3.1
|
4.54
|
4.83
|
Average 14% EPS growth for an old blue chip like IBM is great. Most people talk about GOOG, AAPL, or AMZN but this rate is just fine.
Dividend Stats
|
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013e
|
5y Avg
|
10y Avg
|
Dividend
|
0.7
|
0.78
|
1.1
|
1.5
|
1.9
|
2.15
|
2.5
|
2.9
|
3.3
|
3.8
|
$2.93
|
$2.06
|
Dividend Yield
|
0.71%
|
0.95%
|
1.13%
|
1.39%
|
2.26%
|
1.64%
|
1.70%
|
1.58%
|
1.72%
|
1.99%
|
1.73%
|
1.51%
|
Share buyback %
|
2.75%
|
4.98%
|
4.76%
|
7.10%
|
4.99%
|
3.06%
|
4.20%
|
6.01%
|
5.11%
|
4.60%
|
4.77%
| |
Div Growth
|
11.43%
|
41.03%
|
36.36%
|
26.67%
|
13.16%
|
16.28%
|
16.00%
|
13.79%
|
15.15%
|
14.88%
|
21.10%
| |
EPS Payout Ratio
|
14.20%
|
16.02%
|
18.00%
|
20.89%
|
21.28%
|
21.48%
|
21.70%
|
22.21%
|
22.96%
|
22.50%
|
22.17%
|
20.12%
|
Earning Report Notes
Q4-2014
EPS: $6.14 (operating) (+14%)
Revenue: $27.7b (-5%)
Software: +4%
Hardware: -$750m
Systems and Tech: -24%
Americas: -2%
China: -23%
GBS division had double digit growth
New technologies and initiatives (Smart Planet, Cloud, WebSphere) are growing by double digits. Overall company is down. Their legacy stuff is struggling which for tech makes sense and has to be updated. IBM is delivering.
2013: Cloud +69% revenue
Smartplanet +20% revenue
$15b free cash flow
M&A: $3b
Dividends: $4b
Share Repurchase: $14b
2014: $1b invested in Watson
2015 Roadmap: EPS $20
Q2-2013
EPS: $3.22, +8% Y/Y, 2013 estimate: $16.70
Revenue:
Americas: -3% (but strong in Brazil)
EMEA: -1%
Asia-Pacific: 0% (Japan +3%)
Smarter Planet: +25% H1
Cloud +70% H1
Mentioned hedging JPY
Cash Flow: $2.7b (-$1b Y/Y)
Share Repurchase: $6.1b H1
Dividend: +12% (10th consecutive year of double digit growth)
Company and Industry specific commonly used acronyms and terms
None
Resources
Company Website: http://www.ibm.com/us/en/
Investor Relations: http://www.ibm.com/investor/
Morningstar: http://quotes.morningstar.com/stock/ibm/s?t=ibm
Transcripts: http://seekingalpha.com/symbol/ibm
Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.
Great analysis! I've been watching IBM for a few months thinking it looked like a decent value on its face but had not really done any due diligence on it as it was further down my list. Still not at the very top but I am definitely more interested and will have to look a bit deeper. Thanks!
ReplyDeleteThanks for the compliment and for posting. I try to do analysis a bit different then most investing blogs so there is less overlap.
DeleteGreat take on international business machnes.
DeleteLooking at the fast graph chart, it does appear ripe for purchasing. Solid eps and dividend growth. Yield is a bit low, but I think you're right in that growth will make up for it. Warren Buffett likes it, always a plus.
ReplyDeleteI need someone to write "IBM for dummies" because apparently I'm an idiot. I just spent half an hour over at IBM's webpage and I feel I understand the company even less now. I'll continue trying to figure it out because the numbers do look good.
Have an awesome weekend PMU!
I usually don't look at company websites for details of their products and business because I assume it'll just be PR spun hooplah. I get most of my info from the concalls... http://seekingalpha.com/article/1958391-international-business-machines-management-discusses-q4-2013-results-earnings-call-transcript
DeleteYou are right, it can be hard to figure out what a company does at times.