Will Microsoft (MSFT) Beat Earnings Estimates This Quarter?

Zacks

Microsoft Corp. (MSFT) is set to report fourth quarter fiscal 2013 results on Jul 18. Last quarter, it posted a 7.00% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Microsoft’s third-quarter earnings of 72 cents were 5 cents higher than the Zacks Consensus Estimate. Revenues were down sequentially due to seasonality but were up year over year. In fact, all segments grew strongly from the year-ago quarter, driven by higher Windows and Office sales.

Margins increased sequentially due to the change in sales mix, which favored higher-margin products.

However, the technology giant is yet to gain traction for its smartphone and tablet OS. Though Microsoft is optimistic about its Surface tablet and is rapidly strengthening its global retail presence, the product has not yet stirred the interest of users. So, in order to regain its lost position in computing market and further strengthen its position in the cloud, Microsoft’s decision to reorganize its business is justifiable.

Earnings Whispers?

Our proven model does not conclusively show that Microsoft will beat earnings this quarter. That is because a stock needs to have both a positive earnings expected surprise prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 74 cents. Hence, the difference is 0.00%.

Zacks Rank #4 (Sell): We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Our model states that a stock needs to have both a positive earnings ESP and a Zacks Rank #1, #2 or #3 to beat earnings estimates. You could, therefore, consider other stocks like: 

Sandisk Corp. (SNDK), with an ESP of +4.55% and a Zacks Rank #1 (Strong Buy)

Syntel Inc. (SYNT), with an ESP of +3.81% and a Zacks Rank #1 (Strong Buy)

Scientific Games Corporation (SGMS), with an ESP of +100.0% and a Zacks Rank #2 (Buy)

Read the Full Research Report on SNDK

Read the Full Research Report on MSFT

Read the Full Research Report on SGMS

Read the Full Research Report on SYNT

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