) reported second-quarter earnings per share of $1.12, beating the consensus forecast of $1.03 and up from $1.01 a year ago. First Albany upgraded the stock to buy from neutral.
Analyst Joel Wagonfeld says $1.12 second-quarter EPS beat his $1.04 estimate. He notes services revenue was in line, while hardware and software beat estimates. Gross margins beat estimates in each of these areas.
Wagonfield says his main concerns were limited visibility, given the first quarter's reduced earnings, restructuring-related execution risk, decelerating revenue growth, and product transitions. But the second quarter's strong backlog, crisp execution, upcoming mainframe product cycle, and restructuring savings at the high end of prior ranges have fed his confidence.
He increased his EPS forecast from $4.82 for 2005 to $4.99, and $5.35 for 2006 to $5.57.