From Armonk, N.Y., not many stockholders are blue Thursday after reading the quarterly earnings news from Big Blue, released after market hours Wednesday. While the overall revenue numbers from IBM (NYSE: IBM) missed estimates, the quarterly earnings-per-share boasted $3.51, which was 9 cents higher (2.6 percent) than the Street was expecting. But that wasn’t all. What has investors smiling Thursday was that the company raised its 2012 EPS guidance to above market consensus. The Street has responded by boosting IBM stock more than 3 percent to north of $194 per share in the early moments of Thursday’s trading day.
The EPS number was 11 percent higher than in Q2 of 2011, and the revenue number of $25.8 billion was down 3 percent from a year ago (but up 1 percent when accounting for currency), according to the report by the company. Net income was $3.9 billion, up 6 percent from a year ago, and free cash flow of $3.7 billion was up 9 percent from 2011.
“In the second quarter, we delivered strong profit, earnings per share and free cash flow growth. This performance reflects continued strength in our growth initiatives and investments in higher value opportunities,” said Ginni Rometty, IBM CEO. “These are fundamental elements of our long-term business model. Looking ahead, we are well positioned to deliver greater value to a wider range of clients and to our shareholders. Given our performance in the first half and our outlook for the second half, we are raising our full-year operating earnings per share expectations to at least $15.10.”
The company did acknowledge in its report that two main reasons the EPS beat expectations was a 1.2 percent increase in gros profit margin to 47.6 percent, and a $3 billion stock buyback. Overall, the company reported revenue losses in services (3 percent) and hardware (9 percent) along with flat revenue growth year-over-year. Currency inegatively impacted revenue by about $1 billion, the company reported.
The numbers have looked pretty good to the Street for IBM, and that means some growth for hedge funds like Warren Buffett’s Berkshire Hathaway and Ken Fisher’s Fisher Asset Management. Berkshire had nearly 19 percent of its portfolio invested in IBM ($13.4 billion) at the end of March, while Fisher was in for $460 million (1.2 percent of portfolio). Both funds had increased their stock holdings slightly in the first quarter of 2012 (1 percent).