With Earnings Seasons Right Around The Corner, Is Now A Good Time To Buy Microsoft (MSFT)?

Todays top stocks to buyMicrosoft looks primed to hand investors a quick gain.  Here’s why…

After years of mediocre performance under the guidance of long time CEO Steve Ballmer, Microsoft Corporation (MSFT) could be on its way to cementing itself as the “Microsoft Of Old” – an innovative tech leader with huge growth possibilities.

In fact, newly hired Microsoft CEO Satya Nadella has worked to shake things up at the legendary tech company.

Since his arrival, he oversaw the completion of the $9.5 billion Nokia acquisition, he welcomed two new board members and shuffled around key members of the management team, he announced 18,000 job cuts to most of the Nokia staff, and he continued to oversee Microsoft’s aggressive and promising expansion into Cloud-Based Services.

More recently, the company launched the new Xbox One and also announced that it would buy Mojang AB, the maker of the hugely successful Minecraft video game, for $2.5 billion – which marks Nadella’s first deal as CEO.

With earnings season fast approaching, we could see its stock appreciate even more as their latest sales numbers get released.

Last quarter, Microsoft Corporation (MSFT) reported strong 1Q 2015 results for the three months ended September 30, 2014. MSFT reported earnings for 1Q 2015 of $0.54/diluted share. The company recently increased its dividend by 11% to $0.31/sh.

In 1Q, 2015 MSFT paid out $2.3 billion in dividends and repurchased $2.88 billion in stock.

Book value per share increased to $10.94/sh.

Microsoft also provided the following guidance for its fiscal 2015 second quarter:

▪ Revenue between $25.4 billion and $26.5 billion
▪ Cost Of Goods Sold (COGS) of $9.5 to $9.9 billion
▪ Operating expenses between $8.6 billion and $8.8 billion
▪ Other income/(expense) will generally offset
▪ Full year tax rate of 20 to 22 percent

However, we believe that with commercial revenue up 10% to 12.28 billion, their Devices & Consumer Revenue up 47% to $10.96 billion, the Xbox One launching in China, and Surface Pro revenue gaining momentum, Microsoft Corp. looks poised to continue its strong performance well into the future and their revenues could come in above guidance for 2Q 2015.

But we aren’t the only ones who feel Microsoft will have strong financial performance this fiscal year. Here are the analyst estimates for MSFT:

Earnings Est Current Qtr.
Dec. 14
Next Qtr.
Mar. 15
Current Year
Jun. 15
Next Year
Jun. 16
Avg. Estimate 0.72 0.69 2.67 3.14 
No. of Analysts 24.00 24.00 24.00 31.00
Low Estimate 0.65 0.61 2.47 2.61
High Estimate 0.89 0.82 3.18 3.72
Year Ago EPS 0.78 0.68 2.63 2.67 

 

Earnings History Dec. 13 Mar. 14 Jun. 14 Sep. 14
EPS Est 0.68 0.63 0.60 0.49
EPS Actual 0.78 0.68 0.55 0.54
Difference 0.10 0.05 -0.05 0.05
Surprise % 14.00% 7.90% -8.30% 10.20%
Share Performance
1 Day After
-0.67% 1.05% 1.03% 0.41%
Share Performance
7 Days After
-2.67% -2.90% 4.33% 0.70%
Share Performance
30 Days After
1.15% -1.44% 7.65% 4.51%

As you can see, not only are analysts projecting higher earnings, Microsoft has outperformed analyst estimates 3 of the last 4 quarters by margins of 1% to 7%.

This outperformance has driven its stock higher over the last year following earnings — and that’s why we believe now is a good time to buy shares in MSFT. Earnings are right around the corner.

Yours in profits,

Todays top stocks to buy
John Holt for Top Stock Millionaire
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