Microsoft Earnings Preview

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Microsoft (NAS: MSFT) beat estimates by $0.11 last quarter and investors are hoping it can beat them again. The company will unveil its latest earnings on Thursday. Microsoft develops, licenses, and supports a range of software products and services for a variety of computing devices.

What analysts say:

  • Buy, sell, or hold?: The majority of analysts back Microsoft as a buy. But with 66.7% of analysts rating it a buy, Microsoft is still below the mean analyst rating of its nearest 10 competitors, which average 67.1% buys. Analysts like Microsoft better than competitor IBM overall. Twelve out of 20 analysts rate International Business Machines a buy compared to 16 of 24 for Microsoft. Analysts still rate the stock a moderate buy, but they are a bit more wary about it compared to three months ago.
  • Revenue forecasts: On average, analysts predict $17.25 billion in revenue this quarter. That would represent a rise of 6.5% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $0.68 per share. Estimates range from $0.64 to $0.72.

What our community says:
CAPS All-Stars are solidly behind the stock with 91.2% giving it an outperform rating. The community at large backs the All-Stars with 87.1% assigning it a rating of outperform. Fools are keen on Microsoft and haven't been shy with their opinions lately, logging 5,191 posts in the past 30 days. Despite the majority sentiment in favor of Microsoft, the stock has a middling CAPS rating of three out of five stars.

Management:
Microsoft's profit has risen year over year by an average of 27.9% over the past five quarters. Revenue has now gone up for three straight quarters.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q4

Q3

Q2

Q1

Gross Margin

78.6%

76.3%

75.8%

80.6%

Operating Margin

35.5%

34.8%

40.9%

43.9%

Net Margin

33.8%

31.8%

33.2%

33.4%

For all our Microsoft-specific analysis, including earnings and beyond, add Microsoft to My Watchlist.

The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

At the time this article was published

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