What happened
Shares of International Business Machines (NYSE:IBM) jumped as much as 4.8% on Wednesday, following an impressive fourth-quarter earnings report on Tuesday night. By 3 p.m. EST, Big Blue's stock had cooled down somewhat to a 3% gain.
So what
IBM's fourth-quarter sales held steady year over year at $21.8 billion and adjusted earnings fell 3% to $4.71 per share. Your average analyst would have settled for earnings of roughly $4.68 per share on revenue near $21.6 billion. The company also set its full-year profit guidance slightly ahead of current Wall Street projections.
IMAGE SOURCE: IBM.
Now what
The computing systems and IT consulting giant expects a return to revenue growth and solid bottom-line earnings in 2020, reaping the cloud computing rewards of buying open-source software veteran Red Hat for $33 billion last summer. It will take a couple of years to pay down the additional debt that the deal required, but the buyout is already paying dividends in the form of a cool $1 billion of additional revenue per quarter and a positive contribution to IBM's free cash flow.
Today's significant price increase makes sense in light of this solid earnings report and optimistic guidance targets.
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