IBM raises expectations after strong first quarter
IBM Corp., one of the leaders in American leaders in computer technology, delivered strong first quarter 2011 earnings, beating the Zacks Consensus Estimate by 11 cents. The solid result was primarily driven by robust revenue growth, continued margin expansion and share repurchases in the quarter.
IBM posted non-GAAP earnings per share (EPS) of $2.41 per share in the first quarter. This was up 20.5 percent on a year-over-year basis, primarily due to solid revenue growth, margin expansion and share repurchase.
Total operating expense and other income increased 8.2 percent year over year to $6.97 billion in the quarter, primarily due to higher acquisition costs, research & development expense and selling, general & administrative expense.
Pre-tax income on a non-GAAP basis was $3.99 billion, up 12.1% year over year. Pre-tax margin went up 60 bps to 16.2percent in the quarter.
Total revenue increased 7.7 percent year over year to $24.61 billion, surpassing the Zacks Consensus Estimate of $24.04 billion. This was driven by strong growth in the transaction and outsourcing business.
IBM's key initiatives such as Business Analytics, Smarter Planet and Cloud offerings reported strong growth in the quarter. Business Analytics were up 20.0 percent, with 15 percent contribution to software, and contributing more than 30 percent in Global Business Services.
Software – IBM reported a year-over-year rise of 16 percent to $3.3 billion in its branded key middleware products including WebSphere, Information Management, Tivoli, Rational products and Lotus products.
Accordingly, revenues from the company's Software segment grew 6 percent year over year and stood at $5.3 billion.
Operating systems revenue of $542.0 million increased 9 percent) compared with the prior-year quarter. Revenues from the WebSphere suite of software products shot up 51 percent year over year. Information Management software revenues increased 13 percent. Revenues from Tivoli software rose 8 percent.
Revenues from Business Analytics operations within the Global Business Services and Software climbed an encouraging 20 percent.
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Based on the strong first quarter 2011 results, IBM raised its fiscal 2011 operating EPS estimate to at least $13.15 from its previous guidance of at least $13.00. GAAP EPS guidance increased to at least $12.73 from at least $12.56 for the same period.
Currently, the Zacks Consensus Estimate for fiscal 2011 is pegged at $13.07, which is below management's guided range.
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Edited by Kevin Scarpati
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”