IBM’s (IBM) second quarter results were above the Zacks Consensus Estimates, driven by higher gross margins and operating cost controls. The company also raised its 2009 EPS by 50 cents to $9.70.
As a result of its large non-US revenue base, IBM has been better insulated from the recent weakness in the U.S. economy than many of its peers. We believe that with the strong liquidity position, operational efficiency and improving profitability, IBM is a defensive play in the current environment and is well positioned to benefit from the market recovery.
We maintain our Outperform rating on the stock based on strong fundamentals, substantial free cash flow, solid Services businesses and earnings momentum. However we remain cautious on currency fluctuations, which are taking a toll on revenue and may be critical to earnings growth over the next two years.Zacks Investment Research
