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Wondering what to extrapolate from IBM earnings? Trader Dan Nathan says the big taking away is currency headwinds.IBM said currency changes lowered its revenue by about $1 billion.
Take that development and combine it with the stock's price action and you've got a problem.
“The stock topped out slightly above $200 in early April,” reminds Nathan, editor and co-founder of RiskReversal.com. “At the time the euro / US dollar cross was above 130. Now the euro/dollar cross is around 122. That’s no good.”
That suggests IBM and other multinationals may be challenged by currency headwinds for some time to come.
However, not all the traders found IBM earnings negative.
Analyst Brian Marshall of ISI Group and Guy Adami suggest also taking a look at margins. “The margins were fantastic,” says Adami, managing director of stockMONSTER.com. Gross margins widened to 47.6% from 46.4%.And Marshall says that strength confirms similar strength reported by EMC and VMWare earlier in the month.
Looking at IBM’s results a little more closely, Big Blue posted second-quarter earnings excluding items of $3.51 per share, up from $3.09 a share in the year-earlier period.
Net income was $3.9 billion, or $3.34 per share, down from $3.7 billion, or $3 per share, at the same time last year.
Revenue fell 3 percent to $25.8 billion from $26.67 billion a year ago.
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