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Trending: IBM Has Unexpected Good Quarter

Iuri Struta Jul 30, 2020

Dividend.com analyzes the search patterns of our visitors each week. By sharing these trends with our readers, we hope to provide insights into what the financial world is concerned about and how to position your portfolio.

Bluechip companies have trended this week for various reasons. IBM, first in the list, received a welcome respite after it posted a better-than-expected quarter. Pharmaceutical giant Pfizer might be on track to deliver COVID-19 vaccines to the U.S. government for a profit. Third in the list is Chevron, which recently closed a rare deal in the oil and gas sector. Last in the list is Microsoft, which also posted a strong quarter.

Don’t forget to read our previous edition of trends here.

IBM

International Business Machines (IBM) may have finally turned a corner. The legendary technology company reported a blockbuster report, despite pandemic woes, triggering a host of analyst re-ratings. As such, IBM has seen its viewership rise 30% over the past two weeks, taking the first place in the list.

To be clear, IBM revenues still fell for the second quarter in a row but it beat analyst estimates both on top and bottom lines. Largely, IBM has benefitted from strong demand in its cloud business, with Red Hat revenue up 17% year-over-year. Overall, cloud and cognitive software unit revenue was up 3% to $5.75 billion. With the exception of systems hardware and software, all the other units posted revenue declines.

The continuing strong growth shown by IBM’s cloud business has made analysts and investors optimistic about the stock, although worries still remain about the legacy business. Shares in IBM spiked on the news, but gave up some of the gains since then. IBM shares are down 7% since the start of the year, and 23% over the past five years as the company has been a perennial target of short-sellers.

For those believing in the company’s cloud prospects, IBM pays an annual dividend of $6.43 per share, yielding 5.1%.

IBM

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Pfizer

Pharmaceutical giant Pfizer (PFE) has taken the second spot in the list with an increase in viewership of 28%. Pfizer and German biotechnology company BioNTech struck an agreement with the U.S. government to sell nearly $2 billion worth of COVID-19 vaccines, enough for 50 million people. The vaccine is still in development and the agreement is subject to it successfully passing large clinical trials and successful manufacturing.

The U.S. government will have the right to buy an additional 500 million vaccines, with the price being negotiated at a later stage. The agreement drew praise from President Donald Trump at a press conference, who said Pfizer is the ‘winner.’

Pfizer, which will use its own money to develop the vaccine because it can speed up the process, plans to seek regulatory review of its emergency use authorization application for COVID-19 as early as October. The participants in the trial, around 30,000, will be vaccinated by the end of August.

Pfizer also announced a strong earnings report and upgraded its revenue guidance for 2020, despite disruption stemming from the coronavirus. As a result, the company’s stock surged nearly 5% on the news of the strong earnings reports, cutting year-to-date losses to just below 1%.

Pfizer pays an annual dividend of $1.44 per share, amounting to a yield of 3.8%.

PFE Barchart Interactive Chart 07 29 2020

Chevron

As many oil and gas companies struggle under heavy debt loads and weak oil prices, Chevron (CVX) is out to pick bargains. Chevron, an oil major, agreed to buy Noble Energy for $5 billion in stock. Its shares spiked around 5% following the July 20 announcement, while Noble jumped more than 10%, a sign investors like the deal. Chevron’s deal led to an increase in viewership of 24%.

Chevron will also assume Noble’s debt, increasing the total cost of the deal to around $13 billion. However, Chevron will now get access to low-cost, proven reserves, as well as cash-generating offshore assets in Israel. The deal will also complement Chevron’s U.S. assets in the Permian Basin.

Chevron has been on the lookout for a deal since last year, when it was very close to purchasing Anadarko Petroleum for $50 billion. However, Occidental Petroleum came up with a better deal for Anadarko, and Chevron decided to withdraw from a bidding war, saying it prioritized financial discipline.

Chevron shares are down 26% year-to-date, beating the S&P 500 Energy, which has fallen around 38%. Chevron pays an annual dividend of $4.76 per share, amounting to a yield of 5.3%.

CVX Barchart Interactive Chart 07 29 2020

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Microsoft

Technology giant Microsoft (MSFT) has posted better-than-expected earnings for the fourth fiscal quarter. Microsoft reported earnings of $1.46 per share, compared with $1.34 expected by analysts, while revenue came in at $38 billion versus $36.50 billion. Microsoft saw its viewership rise 16% over the past two weeks.

Shares in Microsoft have lost around 5% since the company reported its earnings. In part, investors were disappointed that Microsoft’s Azure revenue growth slowed from 59% in the previous quarter to 47%. The company said its commercial cloud business brought in more than $50 billion in the fiscal year.

Revenues at its business processes unit, which contains LinkedIn and the Office, came at $11.75 billion – almost 6% above FactSet consensus estimates. At the same time, its personal computing unit saw revenues at $12.91 billion – an almost 14% jump over FactSet consensus estimates. This was largely driven by Xbox content and services revenue that was up 65% on record engagement with consumers as people stayed at home.

MSFT

The Bottom Line

IBM has reported a strong quarter thanks to rising sales of its cloud business, though its legacy assets face long-term challenges. Pfizer reached a deal with the U.S. government to deliver COVID-19 vaccines, subject to it passing large-scale clinical trials. Meanwhile, Chevron closed a rare deal to buy Noble Energy, widely viewed as a sensible move. Lastly, Microsoft posted strong results, but investors were unhappy about the revenue growth slowdown in the cloud space.

Be sure to check out Dividend.com’s News section for next week’s Market Wrap and other great dividend investing news.

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