Shares of IBM slipped in afterhours trading.
Not only did it report a pullback in first quarter revenue, in pulled its annual forecast.
“Looking at the first quarter, through February we were tracking roughly in-line with our expectations,” said Chief Financial Officer James Kavanaugh as quoted by MarketWatch. “As we got into March, the health situation and resulting social distancing became more widespread. As you would expect, we saw noticeable change in client priorities.”
IBM posted net income of $1.18 billion, or $1.31 a share, as compared to the $1.59 billion, or $1.78 a share a year earlier. Revenue slipped to $17.57 billion from $18.18 billion year over year. Analysts were looking for revenue of $17.59 billion.
Also, given recent uncertainty, IBM pulled its guidance for the year. Earlier in 2020, IBM forecast adjusted earnings of $13.35 for the year, as analysts called for $12.01. The company also noted it “will reassess this position based on the clarity of the macroeconomic recovery at the end of the second quarter.”
CFO James Kavanaugh added, “We had solid free cash flow generation, a strong balance sheet, solid investment-grade rating and very good access to the capital markets,” he said. He also emphasized that the company’s dividend is secure—IBM has a yield of 5.4%,” as quoted by Barron’s. “Going through February, we were on track to meet guidance and over achieve, with strong double-digit growth in our software business. But as the lockdowns occurred we were not immune to that.”