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IBM Earnings – The Big Takeaways

Wondering what to extrapolate from IBM earnings?

Trader Dan Nathan says the big taking away is currency headwinds.

IBM said currency changes lowered its revenue by about $1 billion.

Take that development and combine it with the stock's price action and you've got a problem.

“The stock topped out slightly above $200 in early April,” reminds Nathan, editor and co-founder of RiskReversal.com. “At the time the euro / US dollar cross was above 130. Now the euro/dollar cross is around 122. That’s no good.”

That suggests IBM and other multinationals may be challenged by currency headwinds for some time to come.

However, not all the traders found IBM earnings negative.

Analyst Brian Marshall of ISI Group and Guy Adami suggest also taking a look at margins. “The margins were fantastic,” says Adami, managing director of stockMONSTER.com. Gross margins widened to 47.6% from 46.4%.

And Marshall says that strength confirms similar strength reported by EMC and VMWare earlier in the month.

Looking at IBM’s results a little more closely, Big Blue posted second-quarter earnings excluding items of $3.51 per share, up from $3.09 a share in the year-earlier period.

Net income was $3.9 billion, or $3.34 per share, down from $3.7 billion, or $3 per share, at the same time last year.

Revenue fell 3 percent to $25.8 billion from $26.67 billion a year ago.

Analysts had expected the company to report earnings excluding items of $3.42 a share on $26.28 billion in revenue, according to a consensus estimate from Thomson Reuters.

Posted by CNBC's Lee Brodie

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Trader disclosure: On July 18, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long GOOG; Karen Finerman is long GB; Karen Finerman is short SPY; Karen Finerman is short MDY; Karen Finerman is short IWM; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Dan Nathan is long BAC JULY 6 + 7 PUTS; Dan Nathan is long C AUG 26/23 PUT SPREAD; Dan Nathan is long MS OCT 10/5 1X2 PUT SPREAD; Dan Nathan is long INTC JULY/AUG 24 PUT SPREAD; Dan Nathan is long WMT JULY 6750 PUT SPREAD; Dan Nathan is long SBUXAUG 50/45 PUT SPREAD; Dan Nathan is long SDS; Dan Nathan is long VIX AUG 20/25 PUT SPREAD; Josh Brown is long AAPL; Josh Brown is long JPM; Josh Brown is long GDX; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long XLF; Josh Brown is long WMT; Josh Brown is long TGT; Josh Brown is long MCD; Josh Brown is long QCOM

For Brian Marshall
Neither ISI nor its affiliates beneficially own 1% or more of any class of common equity securities of the subject companies referenced in this Report. No person(s) responsible for preparing this report or a member of his/her household serve as an officer, director or advisory board member of any of the subject companies. Neither ISI nor its affiliates have any investment banking or market making operations. At various times these reports mention clients of ISI from whom ISI has received non-investment banking securities related compensation in the past 12 months.

CNBC.com with wires.

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