24 January IBM published a report for the fourth quarter of 2021. The result was better than expected, and shares in the postmarket rose by 2,5%, from 129 to 132 $.
Financial results
Here's how IBM's numbers changed compared to the fourth quarter of 2020, and here's what analysts expected:
- total revenue — 16.7 billion (+6,5%), expectations - $16 billion;
- adjusted earnings per share — 3,35 (+78%), expectations - 3,3 $.
IBM's revenue grew by the most in recent 10 years. The last time sales grew stronger was in the third quarter of 2011, 7,8%.
In part, the company showed such dynamics due to the spin-off of Kyndryl. This division, which helps businesses set up their IT infrastructure. IBM unhooked stagnating Kyndryl in November 2021. Companies now operate independently, and part of IBM's revenue comes from sales to former colleagues.
After the separation, IBM decided to focus the forces and attention of investors on the promotion of a hybrid cloud. It's a cloud infrastructure, which runs on local servers of client companies and servers of IBM itself.
Here's how the company's revenue grew in its main operating segments.
Software - hybrid cloud software for business process automation, data and transaction processing - $7.3 billion (+8,2%).
Consulting - consulting on setting up a hybrid cloud and IBM applications - $4.7 billion (+13,1%).
Infrastructure - Equipment, operating systems and software - $4.4 billion (+0,2%).
In total, IBM earned $6.2 billion from hybrid cloud in the fourth quarter, or 37% of total revenue. Compared to the fourth quarter of 2020, sales of cloud services grew by 16%.
According to IBM, at the end of 2022, total revenue will grow by “several percent”.
Debt and dividends
In 2021, IBM partially reduced its rather big debt from 61.5 to 51.7 billion dollars. Mainly through cash, the volume of which fell relative to December 2020 from 14.3 to 7.6 billion dollars.
Free cash flow for the year amounted to $6.5 billion. Most, or $5.9 billion, IBM sent for dividends. Their company is already increasing 26 consecutive years. Current dividend yield - 5,1%.
As calculated in IBM, in 2022, free cash flow will increase to $10 billion.
What about stocks
Bad news: Since 2013, IBM stock has been steadily falling., like her earnings. Good: IBM is not so overrated, like other technology companies. Until a recent report, IBM was valued at only 1,6 annual revenue, while many companies from the sector are worth 10-20 revenues.
As a result, IBM shareholders are less affected by the current market sell-off. So, from the beginning of 2022 technology index Nasdaq fell on 11,4%, and IBM shares 1,2%. Probably, high dividend yield also deters IBM shareholders from selling.
