Corporate earnings report boosted by low tax rates | Calamatta Cuschieri

Market recap, IBM’s systems business structure and soaring shares for GNC holdings 

IBM’s shares have rallied 10 percent this year on hopes of a strong turnaround in the company’s fortunes
IBM’s shares have rallied 10 percent this year on hopes of a strong turnaround in the company’s fortunes

U.S. Markets closed in negative territory on Thursday.  The Dow Jones industrial average fell 0.37% as investors assessed the possibility of the government shutting down at the end of the week; to avoid this from happening, the Congress needs to pass a spending bill by Friday. Only the blue-chip average hit an intraday record just after the open at 26,153.42 before retreating at 25,947.32. 

IBM returns to growth thanks to its oldest technology

IBM’s shares have rallied 10 percent this year on hopes of a strong turnaround in the company’s fortunes despite falling more than 3% during extended trading on Thursday. The company forecast stable margins and revenue for 2018, buoyed by growth in its newer businesses such as cloud computing and security services.

However, IBM forecast an operating profit of at least $13.80 per share for 2018, compared with $13.80 in 2017 and market expectations of $13.92, according to analysts.

The company’s revenue finally rose in the latest fourth quarter, the first year-over-year increase since the first quarter of 2012, just after Rometty became CEO.

It was IBM’s Systems business that contributed the most to Thursday’s revenue gains, with sales surging 32% to $3.3 billion. In contrast, cognitive solutions — which includes artificial-intelligence services such as Watson Health and Watson Financial — grew revenue by only 3%.

This was the company’s first full quarter with its new z14 mainframe, and its new features such as pervasive encryption and the ability to address blockchain transactions led to new customers. Cyclical gains from businesses that are falling out of favor, even if they include buzzwords like blockchain, are not the best indicator of future success, though.

IBM said that half of its systems revenue now addresses the workloads of its so-called strategic imperatives, which are its core future focus areas. Strategic imperatives as a whole, including cloud computing, cognitive computing and other services, were up 17%.

GNC Holdings jumps 51.6% after its fourth-quarter financial results

GNC Holdings Inc. shares soared 51.6% in Thursday trading after the company gave a premarket profit outlook that exceeded expectations. But the analysts warn that there could be trouble ahead for the health and performance-products chain.

GNC expects fourth-quarter adjusted earnings per share to be in the range of 24 cents to 25 cents, up from 7 cents last year.

GNC announced in December that it had hired Goldman Sachs to explore business alternatives and the result on Thursday – providing preliminary fourth-quarter financial results – is part of such process.

"In the fourth quarter of 2017, our efforts to reposition the business continued to gain momentum," stated GNC CEO Ken Martindale.

"As we head into 2018, we will continue to focus on our key initiatives including capital structure improvement, international business growth, exclusive and innovative products and services, a more engaging e-commerce and digital platform and further customer experience improvements."

In the end, while GNC certainly has plenty of work to do in the coming quarters before investors' concerns are totally appeased, its relative strength in the fourth quarter is a big step to that end. And it's no surprise to see the market aggressively bidding up GNC stock in response.

 

Disclaimer:

This article was issued by Linda De Luca, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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