Microsoft’s Earnings Should Trigger a “Buy”

by Ed Elfenbein | April 21, 2013 10:00 am

[1]After the closing bell on Thursday, Microsoft (NASDAQ:MSFT[2]) reported quarterly earnings of 72 cents per share which was four cents better than Wall Street’s estimate. For the same quarter one year ago, the company made 60 cents per share, and the stock was being rewarded on Friday with gains over 1% on the day.

I’ve been bewildered by the slew of negative comments about Microsoft. Just a few days ago, Goldman Sachs (NYSE:GS[3]) lowered MSFT to “Sell.” Yes, the company does have problems, but don’t let that fool you. The overall firm is very profitable.

For the first three months of the year, MSFT’s fiscal third quarter, their net profits grew 19% to $6.06 billion. While the company is feeling the squeeze from struggling PC sales and weak reception for Windows 8, Microsoft is doing well with its corporate software and Xbox biz.

They’ve also done a commendable job of keeping their costs in check. In fact, cost control was probably the main driver of the earnings beat. Looking at the top line, revenue rose 18% to $20.5 billion which matched what the Street was expecting.

It’s true that search engine Bing is spewing red ink, but let’s add some context. Last quarter, Microsoft’s online division lost $282 million, but the entire company made a profit of more than 20 times that.

Microsoft continues to be a solid bargain, with some new product introductions [4]to bolster its tablet effort already on the table.  The shares currently yield 3.2% and I think we’re going to see a nice dividend increase this September.

Source URL: https://investorplace.com/2013/04/microsoft-story-is-still-a-winner-gs-msf/

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