What to Expect From Microsoft Earnings

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Microsoft Corp. (NASDAQ: MSFT) is scheduled to report its fiscal first-quarter financial results after the markets close on Thursday. The Thomson Reuters consensus estimates are $0.68 in earnings per share (EPS) and $21.71 billion in revenue. The same period from last year had $0.67 in EPS and $21.66 billion in revenue.

This tech giant announced in September that it is authorizing a new $40 billion common stock buyback plan. The timing of this buyback is open. Keep in mind that this company has a market cap of over $440 billion.

Microsoft’s board of directors declared a quarterly dividend of $0.39 per share, reflecting a three-cent or 8% hike over the previous quarter’s dividend. The dividend is payable December 8, 2016, to shareholders of record on November 17, 2016, and Microsoft showed that its ex-dividend date will be November 15, 2016.

Also numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service. Analysts also maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users.

The top analysts believe the company continues to make steady progress with its cloud transition and expect Office 365 and Azure to be solid contributors to top and bottom line for the next several years. While not likely to snag the top slot from Amazon, it could add huge incremental revenue for years to come, especially when you factor in the huge revenue potential from the banks, insurance companies and the financial services industry.

A few analysts weighed in on Microsoft ahead of its earnings:

  • JPMorgan has a Neutral rating with a $55 price target.
  • Goldman Sachs reiterated a Hold rating with a $57 price target.
  • Nomura reiterated a Buy rating with a $65 price target.
  • Credit Agricole reiterated an Outperform rating with a $60 price target.
  • Cowen also reiterated an Outperform rating with a $60 price target.
  • Deutsche Bank reiterated a Buy rating with a $65 price target.
  • Jefferies has a Sell rating with a $40 price target.
  • Macquarie reiterated a Neutral rating with a $54 price target.
  • Pacific Crest reiterated a Buy rating with a $65 price target.

So far in 2016, Microsoft has underperformed the broad markets, with the stock up only 3%.

Shares of Microsoft were last seen at $57.24 on Thursday, with a consensus analyst price target of $59.79 and a 52-week trading range of $47.09 to $58.70.

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