IBM stock at highest level since December 1992

August 20, 1994|By Bloomberg Business News

NEW YORK -- Shares of International Business Machines Corp. closed at the highest level in 20 months yesterday amid growing optimism that rebounding European markets will contribute to gains in revenue and earnings.

Favorable comments by analysts covering the computer company fueled the rally. David Wu, an analyst at S.G. Warburg & Co. Inc., yesterday raised his 12-month price target on IBM to a range of $80 to $85 from $75.

"The bottom line is the ill winds from overseas economies are going to turn out to be good winds going forward," Mr. Wu said. "We have seen very strong business out of Ericsson, Hewlett-Packard and Applied Materials, and I don't think IBM will be exception to the rule."

Shares of the Armonk, N.Y.-based company reached $68.625, before closing up $1.875, at $68.125, its highest close since December 1992. More than 4.66 million IBM shares traded hands in New York Stock Exchange composite trading, almost doubling the stock's three-month daily average volume of 2.38 million. So far in 1994, IBM's shares are up about 19 percent.

Mr. Wu's improved view comes one day after Merrill Lynch & Co. analyst Daniel Mandresh boosted his earnings estimate for the computer company's third-quarter and fourth-quarter earnings.

Mr. Mandresh now expects IBM to earn $1 a share in the third quarter, up from 95 cents, and $1.55 a share in the fourth quarter instead of $1.37.

Big U.S. exporters like IBM and Hewlett-Packard have been helped by the slumping dollar. As the dollar falls against major currencies, U.S. goods become cheaper abroad. At the same time, imports into the U.S. become more expensive. This year alone, the value of the dollar has fallen about 11 percent against the German mark and about 12 percent against the Japanese yen.

"IBM has well over half its revenue overseas and is financially postured to profitably leverage higher revenue growth, especially in 1995," Mr. Wu said. While the analyst isn't raising his $4.20 a share estimate for 1994 earnings or his $5-a-share projection for 1995 for now, he concedes "I think I'll be too low."

Earlier this week, Hewlett-Packard said fiscal third-quarter earnings rose 28 percent as sales of its computers and peripherals rose and European business increased. The No. 2 U.S. computer maker said net income in the quarter ended July 31 jumped $1.33 a share from $1.06 a year earlier, surpassing analyst estimates of $1.28 a share.

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