BofA Securities analyst Wamsi Mohan provides earnings preview ahead of International Business Machines Corporation ( IBM ) second-quarter results release after market close on July 24.

The analyst writes that IBM’s shares are up 12% year-to-date but have lagged behind the SPX index, which gained 18% over the past year. Since the F1Q earnings call, IBM’s shares have risen 8%.

The analyst expects Software (RHT) and Consulting revenues to improve in the second half but sees some risk in the near future, given the weak macro.

The Gen AI segment, with a $1 billion backlog, presents significant opportunities in consulting (75%) and software (25%), says the analyst.

Mohan writes that challenges include a soft macroeconomic environment and profitability heavily weighted towards the fourth quarter, with tough comparisons expected.

The analyst forecasts robust revenue growth for Software (RHT) in the second half of 2024, expecting double-digit increases in the third and fourth quarters, driven by robust bookings, favorable year-over-year comparisons, and potential market share gains from disruption caused by the AVGO/VMW merger.

Mohan anticipates Consulting revenue in the second half of FY24 to benefit from backlog conversion, M&A, and General AI backlog, with a projected increase of 3% Y/Y as reported, or mid-single digits Y/Y in constant currency, in line with guidance.

Overall, the analyst expects IBM ( IBM ) to reaffirm its annual guidance. The analyst reiterated a Buy rating on the stock, with a price target of $209, due to its ongoing turnaround, revenue and cash flow improvements, defensive portfolio, and attractive dividend yield.

According to Benzinga Pro, IBM ( IBM ) stock has gained over 36% in last 12 months. Investors can gain exposure to the stock via FT Vest Technology Dividend Target Income ETF and FT Vest DJIA Dogs 10 Target Income ETF .

Also Read: Why Goldman Sachs Is Bullish On IBM

Price Action: IBM ( IBM ) shares are up 0.25% at $183.29 at the last check Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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