Will IBM's earnings rebound after Q3 2024 dip?

IBM's earnings are expected to rebound after the Q3 2024 dip. Here's a detailed analysis to support this conclusion:

1. Analyst Expectations and Historical Performance: Analysts at Zacks Research have raised their Q3 2024 earnings estimates for IBM, expecting the company to post earnings per share (EPS) of $2.25 for the quarter, up from their prior estimate of $2.20. This indicates a positive outlook for IBM's earnings in the immediate term.

IBM Net Income YoY, Net Income

2. Recent Performance and Surprises: IBM has a history of surpassing earnings expectations. For instance, in Q2 2024, the company reported EPS of $2.43, beating the Zacks Consensus Estimate of $2.16 by $0.27. This trend of exceeding expectations suggests that IBM's earnings may continue to rebound as long as the company meets or exceeds market expectations.
3. Revenue Growth and Market Position: IBM's revenue has shown a year-over-year increase of 1.9% in Q2 2024, reaching $15.77 billion, compared to the consensus estimate of $15.58 billion. The company's strong revenue growth, coupled with its leading position in hybrid cloud and AI solutions, positions it well for continued financial performance.
4. Dividend Yield and Investor Confidence: IBM's dividend yield is 3.53%, indicating a stable and attractive return for investors. The company's consistent dividend payments and strong market presence can bolster investor confidence, potentially leading to increased investment and a rebound in earnings as the company grows.
5. Strategic Initiatives and Future Outlook: IBM's strategic focus on AI and hybrid cloud solutions is expected to drive future growth. The company's innovative platforms, such as Watsonx, are likely to generate incremental revenues, supporting a rebound in earnings as these initiatives mature.

In conclusion, while IBM experienced a dip in earnings in Q3 2024, the company's recent positive earnings surprises, revenue growth, strong market position, and strategic initiatives suggest that its earnings are poised for a rebound in the coming quarters.