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What IBM's Earnings Mean for Mutual Fund Investors (IBM)

Shauna O'Brien Jan 21, 2015

After the closing bell on Tuesday, International Business Machines Corp. (IBM) released its fourth quarter financial results. Here’s what the results mean for mutual fund investors.

Inside IBM’s Results

Earnings

The company reported earnings of $5.48 billion, or $5.54 per share, down from $6.19 billion, or $5.77 per share, last year. Excluding special items, earnings were $5.81 per share – above analysts’ estimate of $5.41 per share.

Revenue
Revenue came in at $24.11 billion, down from $27.39 billion last year. Analysts expected to see revenue of $24.77 billion.

Stock More Expensive Than It Appears

At a glance, shares of IBM appear to be attractively valued. However, investors should be aware that the decline of EPS estimates will impact the stock’s valuation. Investors should also pay attention to the company’s decline in free cash flow and EPS.

If IBM is able to stabilize its earnings, the company does offer a fairly attractive dividend of 2.80% with a relatively low payout ratio of just 27%, which means there is room to raise its dividend in the years ahead.

Mutual Funds to Watch

Investors interested in IBM may be interested in the funds listed below. These funds currently have the largest stakes in the company.

Symbol	Mutual Fund	Stake
{% mutualfund VTSMX %}	Vanguard Total Stock Market	1.68%
{% mutualfund VFINX %}	Vanguard 500 Index	1.08%
{% mutualfund FUSEX %}	Fidelity Spartan® 500 Index	0.42%

The Bottom Line

The funds listed above allow investors to gain exposure to IBM while remaining diversified. Investors interested in IBM may also be interested in Microsoft (MSFT) and Oracle (ORCL).