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IBM ignores EPS investor concerns and sells a growth story – TechCrunch

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IBM ignores EPS investor concerns and sells a growth story – TechCrunch

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By all accountsYesterday was a big day in IBM’s recent financial history. He said his revenue rose 6.5% in the fourth quarter, the highest in years. Investors liked the results and the stock rose after hours trading. That is, until CFO Jim Kavanaugh answered a question on the company’s earnings call regarding its earnings-per-share projections for next year, and the rally fell apart. – at least for a while.

Fast forward to this morning, and investors are apparently focusing more on the good news and ignoring the bad. What did Kavanaugh say that briefly turned the stock around? Stifel Financial Corp. analyst David Grossman asked about EPS (estimated earnings per share), and that’s when Kavanaugh made it clear the company wasn’t going to play that game.

“And I’m a very big believer in focus. And that focus revolves around two metrics: revenue growth and free cash flow. So, I’m not going to talk about EPS orientation. And by the way, EPS, as you very well know, there are many ways to access an EPS number,” he said on the call.

What is the CFO talking about?

Putting on our accounting hats, what the CFO is talking about is not corporate chatter. IBM aims to kick-start growth, the revenue component of Kavanaugh’s comments. Free cash flow is a little more nuanced, but it matters that IBM is more focused on growth than profitability.

IBM ignores EPS investor concerns and sells a growth story – TechCrunch

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