12:00 PM EST, 01/14/2025 (MT Newswires) -- International Business Machines ( IBM ) is expected to report fourth-quarter results in line with estimates, but demand challenges and foreign exchange impacts could cause some turbulence, UBS said in a note Monday.

Analysts, including David Vog, said that a slower-than-expected recovery in IT demand and a tough comparison from a $241 million pre-tax gain in Q1 create risks. Additionally, during Q4, the strength of the US dollar against the Euro, British Pound, and Japanese Yen will create a larger revenue headwind than initially expected. IBM's ( IBM ) tax rate in Q1 was only 5.7%. A decrease in "workforce rebalancing" year-over-year could help offset the lower tax rate and the gain.

"Therefore, our $14.54 billion revenue forecast, which reflects approximately 1.6% constant currency growth and a one-point foreign exchange headwind, compared to the consensus modeling approximately 2.5% constant currency growth, is more likely than the consensus. Finally, given the headwinds, we forecast Q1 2025 EPS of $1.35, which is below the consensus estimate of $1.59, but we note that we are not modeling a significant drop in workforce charges year-over-year," the analysts said.

The analysts added that revenue, on a reported basis, is projected to meet their estimate of $17.62 billion, reflecting a 1.4% growth year-over-year. Software revenue growth is projected to be approximately 11% in constant currency. For consulting, they expect a 50 basis point decline in reported revenue. The analysts anticipate EPS of $3.71, compared to the consensus estimate of $3.77, which is a decline of about 4% year-over-year.

UBS adjusted its price target on IBM ( IBM ) to $160 from $150 while keeping its sell rating.

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