Microsoft Corp. (Nasdaq: MSFT) is trading higher ahead of the
company's first quarter earnings report, expected out after the
market closes today. Shares are up0.2% in afternoon trading.
The tech giant is expected to report an EPS of $0.55 on revs of
$15.81 billion. In the fourth quarter, 2010, the Redmond, WA-based
company reported an EPS of $0.51 on revs of $16.04 billion. Last
year, in Q110, the company posted an EPS of $0.48 on revs of
$15.06, edging out the consensus EPS of $0.47 on revs of $14.78
Shares of the company gained a little through the quarter, ending
it 6.3% higher to $24.49. The stock is trading 6.7% up since the
end of the quarter, but is 14% down from the $30.50 that it started
at for 2010.
A simple valuation pegs Microsoft trading at 10x next year's EPS
estimates, a little cheaper than the 13.8x for Apple (Nasdaq:
AAPL), 13.2x for Oracle (Nasdaq: ORCL), and 18.6x at Google
Data from Bloomberg has 30 analysts with a Buy rating on MSFT, 12
with a Hold, and none suggesting to Sell. The analyst price target
average is $32, with a high of $40 and a low of $27.
Analyst Ratings Through the Quarter
In August, Global Equities downgraded the shares from Overweight to
Equalweight, with a price target of $25.
Also in August, S&P Equity downgraded from Buy to Hold, cutting
their price target from $35 to $31.
Wells Fargo started coverage on Microsoft with a Market Perform and
of $27 - $29.
Hapoalim Securities started with a Buy rating and $30 price target.
In September, Standpoint Research
with a Buy rating and $29 price target.
Deutsche Bank thinks Microsoft will report an EPS of $0.52 on revs
of $15.9 billion, mixed to the Street consensus. The quarter should
be driven by enterprise adoption of Windows 7 and the
non-enterprise adoption of Halo: Reach. Sale of Halo reached $200
million on its first day. DB thinks the most important metric going
into the earnings release will be their unearned revenue, which DB
has pegged at $13.3 billion. Key issues on the call will be the
Yahoo! (Nasdaq: YHOO) partnership, cash usage, mobile strategy for
the upcoming release of the Windows Phone 7, and what they're going
to do with all that cash. They have a Buy rating and $35 price
target on the shares.
Janney notes that Yahoo! reported a ho-hum quarter, but said that
when they spoke of their partnership with Microsoft, all deadlines
were being met and organic search results have improved markedly/
Janney sees an EPS of $0.56 on revs of $16.2 billion. Janney also
has a Neutral rating on the shares, with a fair value of $28.
Notably in the quarter, Microsoft increase their quarterly dividend
23% to $0.16 per share. The new yield of about 2.5% might have
drawn some investors back into the stock, which has been hovering
in the range of $21 to $30 for about 18-months.
The company also introduced their new Windows Phone 7, which looks
solid (more solid when compared to the failed KIN device), but with
Apple also introducing a revamped iPhone in their quarter, and
) making strides with their smart phone offerings, some are pegging
the move as too little too late.
Another area of risk is the tablet market, which is causing a
consumer shift from PCs and netbooks. Though mass transition will
take a while, the sheer excitement and volumes that Apple's iPad
has seen has driven multiple developers and manufactures to
step-it-up and get their own device on the market ahead of the
holidays. Microsoft may also enter the market, but their high
exposure to the PC market may have cost some sales and software
upgrades through the quarter. Barclays lowered their estimates in
September, noting that Microsoft is most exposed to slowing PC
demand. They lowered their FY11 outlook from $70.2 billion in revs
and an EPS of $2.44 to $68.9 billion in revs and an EPS of $2.39.
Investors may also be curious about their Office 2010, which come
out during the quarter, and any comments about recent key executive
Microsoft Corp. is expected to release their Q111 earnings on
Thursday, October 28, 2010, at approximately 4:00pm EDT. Stay tuned
section to see our analysis of the highly-anticipated quarterly
results within seconds of their release.