IBM returns to growth after six years

IBM -4.4% despite beating Q4 estimates, posting first revenue growth in nearly 6 years

The Dow Jones Industrial Average briefly passed 26,000 Tuesday morning for the first time in the history of the index. Analysts polled by Thomson Reuters expected revenues of $22.05 billion for the quarter.

What was most promising about the earnings report is that IBM is now showing through increased revenue the major strides it has made into new-generation IT segments. Now that streak has finally ended - a positive sign as the company faces competition from faster-growing companies like Amazon, Google and Microsoft. The charge includes re-measurement of deferred tax assets and liabilities and a tax on profits overseas.

Including that particular charge, the rate for taxes during the quarter was 124% and 49% for the full year.

"IBM hit their numbers, so I think the reason why shares are down is the shares have been up materially in the last 18 days.so they're giving a little bit of that up", Pivotal Research analyst Lou Miscioscia said.

IBM observers continue focusing on the strategic initiatives of the company - cloud, analytics, security and mobile - to deliver its growth in revenue.

IBM reported full-year 2017 revenue of $79.1 billion, a 1 percent decrease from $79.9 billion in fiscal year 2016. The company's shares had risen almost 10 percent this year, and some investors were apparently expecting stronger results. Over the trailing-12-month period, strategic imperatives generated 45% of IBM's total revenue and grew by 10%.

"Looking under the surface, however, it appears that strategic imperatives excluding Systems only grew 6 percent, largely driven by the lack of Cognitive Solutions growth", Berenberg analyst Josep Bori said. The company returned $9.8 billion to shareholders through $5.5 billion in dividends and $4.3 billion share buybacks.

Revenues in the fourth quarter of 2017 grew 3.6 per cent, compared to the year before, to a total of $22.54 billion, marking the first rise since new CEO Ginni Rometty took the helm. Its adjusted profit of $5.18 per share was a penny above analysts estimates.

During a conference call, IBM said that it is expecting its earnings per share to be a minimum of $13.80 during 2018, excluding special items.

IBM forecast a 2018 operating tax rate of 16 percent, plus or minus 2 percentage points, compared with a rate of 12 percent in 2017. The price is nearly the same as it was a year ago, with the S&P 500 index rising 23 per cent.

After IBM talked about guidance and its tax rate, the stock came up in after-hours trading, hovering between 2%-3.5% below the closing price of $169.12 per share.

"We've been doing a lot of work to reposition our business, to move our customers to the future", Kavanaugh said. But the company didn't announce any specific adjustments.

Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) - revenues of $9.2 billion, down 1 percent (down 4 percent adjusting for currency). Its content is produced independently of USA TODAY.

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