12:01 PM EDT, 10/14/2024 (MT Newswires) -- International Business Machines ( IBM ) Q3 constant currency revenue is likely to grow about 3%, a slight decrease from Q2, UBS Securities said in a note to clients on Monday.

UBS analysis indicates that the company's Q3 reported revenue will align with or slightly exceed its estimate of $14.9 billion, compared with the consensus estimate of $15.1 billion, the note said.

Meanwhile, the company's foreign exchange-neutral revenue growth is projected to be 2.8%, about 1 percentage point slower than the 3.8% constant currency growth in Q2, driven by nearly 8.3% constant currenct growth in Software due to acquisitions and a 1.5% constant currency decline in "Consulting," according to the note.

For Q4, UBS expects IBM ( IBM ) to report constant currency revenue growth of about 3.5%, aligning with the firm's full-year estimate, while the consensus is around 4%. This growth is driven by 8% constant currency growth in Software and flat growth in Consulting, offset by a 1% decline in Infrastructure, the note said.

"While Q3 and Q4 should be in-line with expectations, our analysis indicates Q1:25 EPS Cons EPS ests are aggressive," UBS said, adding that the pending HashiCorp ( HCP ) acquisition could further dilute EPS by 7cents to 8 cents in Q1 of 2025. Thus, the consensus EPS estimate of $1.60 is likely to be revised down to just 3% to 4% growth.

UBS has a sell rating on IBM ( IBM ) with a price target of $145. "Our $145 price target reflects low single digit organic growth long-term given a mix of legacy software and hardware assets that are not expected to grow offset by growth in recently acquired Software assets," UBS said.

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