IBM gains value as its quarterly earnings and 2019 outlook beat estimates

International Business Machines Corp. gave a positive forecast for 2019 and beat analysts’ estimates for quarterly sales and earnings, led by its business that helps companies and governments manage their technology.

Revenue was $21.8 billion in the fourth quarter, topping the average analyst forecast of $21.7 billion. Earnings were $4.87 a share, also beating analysts’ forecasts. IBM said it sees adjusted earnings per share of at least $13.90 in 2019.

The shares rose 6 percent in extended trading. They had dropped almost 25 percent in the past 12 months, closing Tuesday at $122.52 in New York.

Chief Executive Officer Ginni Rometty has been touting IBM’s newer businesses in the cloud and artificial intelligence as agents for growth. But in the past year, increases have come from traditional markets instead. IBM’s consulting business flipped from declines into growth in the period ended Dec. 31, with revenue gaining 4 percent to $4.3 billion in the Global Business Services unit from the period a year earlier.

Revenue from cloud-based offerings grew about 12 percent to $19.2 billion in 2018, about half the growth rate of last year. IBM agreed to buy software maker Red Hat Inc. for $33 billion in October to jump-start its efforts to catch up in the cloud. Rometty called the purchase “a game changer” for IBM.

“While IBM delivered a decent quarter relative to expectations, we still have reservations about the future growth prospects for the company,” Josh Olson, an analyst with Edward Jones & Co., said in a note.

After six years of revenue declines, IBM showed two consecutive quarters of growth in the first half of 2018. Those were largely due to its legacy mainframes, the massive computers that help power global financial transactions and other complicated calculations for businesses and governments.

Revenue generated by the company’s systems unit, which includes hardware and operating systems software, declined 21 percent in the fourth quarter to $2.6 billion. Technology services and cloud platforms sales fell 2.9 percent to $8.9 billion while Cognitive Solutions, which includes artificial intelligence and analytics software, reported revenue of $5.46 billion, little changed from the period a year earlier.

Earlier Tuesday, IBM also announced a win for its cloud business. The company signed a major extension of its agreement to sell IT services to French bank BNP Paribas SA. The eight-year deal is worth about $2 billion to the company, according to a source familiar with the agreement.

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IBM gains value as its quarterly earnings and 2019 outlook beat estimates