International Business Machines (NYSE: IBM) reported last week that it grew revenue in the fourth quarter, putting an end to a five-year streak of declines. The IT giant also guided for higher revenue in 2018, along with stabilizing margins. That's good news for a company trying to convince investors that its turnaround is on track.

But the stock tumbled on Friday, the day following the report. While the top line finally started moving in the right direction, the bottom line is stalling. IBM expects to report at least $13.80 in adjusted earnings per share in 2018, flat compared to 2017. Both revenue and earnings are going to need to grow in tandem to truly convince the market that IBM stock shouldn't be trading at a depressed valuation.

Image source: IBM.

A currency and tax problem

IBM enters 2018 in a relatively strong position on the revenue front. It started shipping its latest z14 mainframe system in September, and it launched the first systems powered by its new POWER9 processor late last year. Both of these will provide a tailwind for IBM.

Another tailwind is currency. A weakening U.S. dollar boosted IBM's revenue growth by about 3 percentage points in the fourth quarter, and that trend will likely continue in 2018. This isn't "real" revenue growth, but it does help the numbers look a bit better.

While currency is boosting the top line, it's hurting the bottom line. Currency hedges and translation effects knocked down profits during the fourth quarter by boosting expenses by 4 to 6 percentage points. New CFO James Kavanaugh expects this to continue in 2018, one reason for IBM's lackluster earnings guidance.

Taxes are another problem. IBM took a big one-time $5.5 billion charge related to the Tax Cuts and Jobs Act in the fourth quarter, but it also expects its effective tax rate to rise this year. IBM's effective tax rate in 2017 was 12%, the low end of its guidance range. The company expects this effective rate to grow to 16%, plus or minus 2%, in 2018. A lower U.S. corporate rate will be offset by a broader tax base and reduced foreign tax credit utilization. The result is a significant headwind that will wipe out any earnings growth.

Kavanaugh views the tax bill as a positive even though it hurts IBM's near-term results. "Tax reform provides additional flexibility over the longer term," he said during the earnings call. But for investors betting on IBM's transformation, it's yet another bump in the road.

Does any of this matter?

For long-term investors, these currency and tax-related headwinds aren't the real story. Both will eventually pass. What really matters is the performance of IBM's various businesses.