Tuesday, January 19, 2016

IBM Earnings & MKC Downgrade

IBM had another quarter of declining revenue. The stock is down in after hours and now close to yielding 4%. I think the turnaround will be tumultuous given the economic landscape. Also CTSH is moving into their territory ever more slightly this year. Hopefully it does not hurt profit margins for either company. Either way I still like both, and at this price IBM is looking real attractive to those who want to start a position with a long term time frame. One could do a lot worse in this environment.

Here is the CEO's statement from IBM's earnings release.

"We continue to make significant progress in our transformation to higher value. In 2015, our strategic imperatives of cloud, analytics, mobile, social and security grew 26 percent to $29 billion and now represent 35 percent of our total revenue," said Ginni Rometty, IBM chairman, president and chief executive officer. "We strengthened our existing portfolio while investing aggressively in new opportunities like Watson Health, Watson Internet of Things and hybrid cloud. As we transform to a cognitive solutions and cloud platform company, we are well positioned to continue delivering greater value to our clients and returning capital to our shareholders."

Also JP Morgan downgraded MKC today. I'm going to watch this one as the analyst said the company was overvalued based on its historical valuation and recent EPS growth. While that might be somewhat true I think the company offers one of the few places to hide right now. Look at how steady the stock price has been since August. It's traded in a 10 point range. I'd bet a lot of people would be willing to have that kind of stability the last few months. The company is well run and in my opinion not in any danger whatsoever. I'll take this analysts near term view as an opportunity to put the stock on watch for another add. I'd love to get shares below $75.  I said it before and I'll say it again. I'd buy this whole company if I had the means to.

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