IBM prepared for 3% tax rate swing from reforms

By Leia Klingel Tax Reform FOXBusiness

IBM beats third-quarter estimates

FBN's Nicole Petallides reports on IBM's third-quarter earnings.

IBM (IBM) has maintained its ongoing operational tax rate expectations of 15%, plus or minus three points, as tax reform discussions continue in the United States.

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This tax rate forecast was issued in January 2017, when the company provided its EPS guidance. That range was widened due to President Trump’s plans to overhaul the U.S. tax system.

In prepared remarks discussing the company’s third-quarter earnings, IBM CFO Martin Schroeter stated: “As we enter the fourth quarter with a seasonally large transaction base, we continue to see an ongoing operational tax rate of 15%, plus or minus three points as the right range, and as you know, that’s not changed since we provided EPS guidance back in January. Remember we widened the range in 2017 because of the tax reform discussions currently underway at a political level.”

IBM CEO Ginni Rometty has frequented the White House along with other CEOs, meeting with President Trump to discuss business policies.

The company noted that ongoing tax reform discussions could still result in planning actions this year, but right now in the fourth quarter, their views on tax remain unchanged.

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After the regular trading session on Tuesday, IBM reported that it earned $3.30 per share (adjusted), topping the Thomson Reuters compiled consensus analyst estimate for $3.28. Revenue fell to $19.15 billion versus $19.23 billion year-over year, but surpassed analysts’ expectations of $18.6 billion.

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IBM stock has lost 12% this year, though it surged almost 8% at market open Wednesday thanks to the earnings beat, adding about 78 points to the Dow.