Analysts Expect Firm to Report Lower Annual Profits; Little Relief in Sight : IBM Stock Price Falls to Lowest Level in a Year

International Business Machines stock tumbled to the lowest level in a year Tuesday, and Wall Street analysts say there is little the computer giant can do at any time soon to reinstill investor confidence.

IBM will report its 1986 earnings early next week, and analysts say it will report its second consecutive year of falling earnings.

While the Dow Jones industrial average has climbed nearly 500 points in a year, IBM, one of the 30 stocks in the average, has dropped nearly a third in value, including Tuesday’s $4.125 decline to $116.25 a share, compared to IBM’s 52-week high of $161.875.

“I don’t see much that can propel the stock higher,” said Ulrich Weil of Weil & Associates, “except a serious expense-cutting posture that carries a real bite.”

IBM’s tradition of avoiding layoffs makes that move unlikely.

Analysts, meanwhile, said IBM’s stock could reach $110 a share, perhaps even $100, over the next several months.

Although some analysts believe that IBM’s financial position will strengthen by late 1987, others see no such light at the end of the tunnel.

“A number of factors cause concern when we look to 1988,” said Paine Webber analyst Stephen Smith.

Most important, he said, sales of IBM’s top-of-the-line 3090 mainframe line, known as the Sierra, will be well along in its life cycle.

Demand for the computer, launched in 1985, could begin taper in the current year, said Jay Stevens of Dean Witter Reynolds Inc.

Competitive pressure will increase from mainframe computer rivals such as Amdahl and National Semiconductor, Smith said.

In other computer segments, the mid-sized and personal computer groups, where IBM is less dominant, the company’s prospects are even bleaker.

Digital Equipment is perhaps even stronger than IBM in the minicomputer segment, and IBM will not be able to deliver a new product for this fast growing computer market until late 1987.

A broad range of low-priced competitors have made inroads in the personal computer market, where the IBM PC was once a powerhouse.

The economy has offered no relief for IBM.

Corporate capital spending, the source of much of IBM’s revenue, has gone through more than a year of retrenchment, amid sluggish growth and weakness in domestic manufacturing.

Tight-lipped IBM reiterated its policy of not commenting on the movement of its stock. IBM’s Pamela Hawkins said the company “maintains a very real optimism for the long-term growth of the industry and IBM’s participation in it.”

Analysts estimate that next week’s earnings per share will drop to about $2.50 from $4.36 in last year’s strong fourth quarter. As a result, IBM’s earnings for the year will again fall.