Tags: Johnson | IBM | China | earnings

Hugh Johnson: IBM Poised for Comeback in 2014

By    |   Tuesday, 17 December 2013 06:58 AM

IBM has been the worst performer of the Dow Jones Industrial Average this year, with its stock sinking 9.2 percent.

But Hugh Johnson, chairman of Hugh Johnson Advisors, expects Big Blue to come back next year.

"IBM has had a tough year, largely because of its international business," he told Yahoo.

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In the third quarter, revenue from emerging markets, excluding China, fell 9 percent, he says. And revenue from China, which accounts for 5 percent of IBM's business, plunged 22 percent.

"If you get some turn in either China or [other] emerging markets in 2014, you're going to get better results," Johnson said. "We'll be headed toward the $20-per-share earnings number that is their target for 2015."

And Johnson sees a good case for recovery in China. An improvement in European economies also will likely boost IBM's results there, Johnson added. So the company is likely to attain the cash flow that has financed massive stock buybacks in recent years, he says.

“I think they're doing just fine. I think their game plan is just fine,” Johnson noted.

Morningstar analyst Grady Burkett, while acknowledging IBM's recent earnings weakness, also sees some underlying strength.

"We still believe IBM can deliver 2 percent annualized revenue growth and 3 percent annualized operating income growth, on average, over the next several years," he wrote on Morningtar.com.

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IBM has been the worst performer of the Dow Jones Industrial Average this year, with its stock sinking 9.2 percent.
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2013-58-17
Tuesday, 17 December 2013 06:58 AM
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