How Will IBM Stock React To Its Upcoming Earnings?
International Business Machines (NYSE:IBM) is scheduled to release its earnings report on Wednesday, April 23, 2025. Historical data suggests a tendency for the stock to react positively to earnings announcements. Over the past five years, IBM has experienced positive one-day returns in 60% of these events, with a median positive return of 4.8% and a maximum single-day gain of 13%.
For event-driven traders, understanding these historical patterns could offer a potential advantage, although the actual market response will ultimately depend on how the reported results compare to consensus estimates and market expectations. There are two primary approaches to consider:
- Pre-Earnings Strategy: Analyze the historical probability of a positive stock movement and establish a position before the earnings announcement.
- Post-Earnings Strategy: Examine the correlation between the immediate stock reaction and medium-term returns following the earnings release, and then position accordingly.
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Currently, IBM holds a market capitalization of $221 billion. Its trailing twelve-month revenue stands at $63 billion, with a solid operational performance yielding $10 billion in operating profits and a net income of $6.0 billion.
Consensus estimates for the upcoming earnings indicate an expected earnings per share (EPS) of $1.43 on sales of $14.4 billion. This is lower than the EPS of $1.68 on sales of $14.5 billion reported in the same quarter last year. It’s important to note that the prior-year quarter’s results included gains from the divestiture of the Weather Company.
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IBM’s Historical Odds Of Positive Post-Earnings Return
Some observations on one-day (1D) post-earnings returns:
- There are 20 earnings data points recorded over the last five years, with 12 positive and 8 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 60% of the time.
- Notably, this percentage increases to 67% if we consider data for the last 3 years instead of 5.
- Median of the 12 positive returns = 4.8%, and median of the 8 negative returns = -5.7%
Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.
IBM observed 1D, 5D, and 21D returns post earnings
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.
IBM Correlation Between 1D, 5D and 21D Historical Returns
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