Analysts think Big Blue has set the bar too high

EEQnWFSIn its results announcement , IBM gave a full-year profit target many analysts sets the bar too high and will result in the outfit ending up on its back while the bar sails throw the air.

Analysts who are a big fan of bars generally think that Big Blue has made solid progress as it shifts into high-growth areas such as cloud-based services, and both profit and revenue beat analysts’ expectations in the second quarter.

But the company may have over-egged the pudding by sticking to its full-year adjusted earnings forecast of at least $13.50 per share, analysts said, especially after it indicated that profit in the current quarter would come in below estimates.

To meet the target, IBM would need to turn in its best sequential improvement in profit in nine years in the fourth quarter

Bernstein analyst Toni Sacconaghi said that it was possible, but unlikely.

IBM, which reported a profit of $14.92 per share from continuing operations last year, has missed its full-year target for the last two years.

The company’s shares were down slightly at $159.53 in early afternoon trading on Tuesday, having risen about 16 percent since the start of the year.

Chief Financial Officer Martin Schroeter indicated IBM would report a third-quarter profit of $3.11 to $3.24 per share.

That means IBM will need to report a profit of between $4.96 and $5.09 per share in the fourth quarter to hit its target.

Analysts on average expect earnings of $3.22 per share for the third quarter and $4.96 in the fourth.

Investors and analysts have raised doubts about IBM’s ability to increase revenue growth in its newer cloud-based and analytics businesses at a pace fast enough to make up for falling revenue in its traditional hardware businesses.

Still, at least eight brokerages raised their price targets on IBM’s stock after the company reported its smallest revenue decline in eight quarters.