(IBM) International Business Machines – Strong Cash Position as Estimates Holding Steady

October 9th, 2009

International Business Machines Corp. (IBM) just hit a new 52-week high and pays a respectable 1.8% dividend, providing shareholders with a 1-2 punch of capital gains and income.

Company Description

International Business Machines develops and manufactures information technology products and services worldwide. Big Blue was founded in 1910 and has a market cap of $161 billion.

Shares of IBM recently hit a new 52-week high above $122 after the technology sector caught a bid from Dell’s strategic acquisition, optimistic words from Intel’s CEO and FaceBook announcing it was cash flow positive. Taking a look back, IBM also helped its cause with better than expected second-quarter results, reported on July 30.

Second-Quarter Results

Sales were down 13% from last year to $23.3 billion, but earnings were better than expected, coming in at $2.32 per share, 29 cents ahead of the consensus. IBM has beat in each of the last four quarters by an average of 14 cents, or 6%.

IBM compensated for its revenue dip with higher gross margins, up more than 2% from last year to 45.5%.

Strong Cash Position

In spite of the company’s debt load of $29.4 billion, it maintains a strong cash position of $12.5 billion.

Estimates Holding Steady

Estimates have held mostly steady over the last few months, with the current year at $9.77 per share, and the next-year estimate pegged at $10.71, a solid 10% growth projection.

Valuation

Based upon the current-year estimate, this growth and income pick also has value, trading at just 10X, a nice discount to the overall market.

The Chart

Shares of IBM recently hit a new 52-week high after crossing a short-term level of resistance just above the $122 mark, take a look below.

Zacks Investment Research
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Read more on International Business Machines at Wikinvest

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