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IBM: Transformation Beating Skeptics

Summary

IBM reported solid Q1 numbers as the company continues a transformation to analytics, cloud and mobile.

The market focuses too much on toppling numbers, missing the huge cash flow benefits to shareholders.

Ignore the skeptics and use any dips caused by the tax benefits as an opportunity to buy a stock with a high yield in the middle of a transformation.

The skeptics keep telling investors to ignore the results at IBM (NYSE:IBM) as the company is dying a slow death. Barclays even slapped a $125 target on the stock prior to earnings, suggesting the recent rally would dissipate on weak revenues.

Now the stock is trading down after hours following a big Q1 EPS beat. The media again focuses on the negatives with IBM, as the company got a $1.2 billion benefit from the previously reported $1.0 billion refund on non-U.S. taxes. The market, though, apparently wants to ignore the relative similar earnings hit from the transformational charges in Latin America that provided a nearly equal impact.

The end result is that the $2.35 earnings per share is a relatively clean number, suggesting the transformation is at the least providing stability, if not the opportunity for future growth...


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