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What Owners of Microsoft Stock Need to Know Before Thursday

The upcoming Microsoft earnings report is sure to draw a crowd, but the numbers won't be the most interesting part of the story

By James Brumley, InvestorPlace Feature Writer

On Thursday after the market closes, software and services giant Microsoft (MSFT) will announce earnings results for the quarter that ended in September — the company’s first fiscal quarter of 2015.

Microsoft stock
Source: Microsoft

Given Microsoft’s general stagnation and handful of earnings misses since 2011, owners of the stock are understandably anxious heading into the event. On the other hand, despite the lack of earnings growth over the past three years, MSFT shares have gained a surprisingly fruitful 73% since this point in the year in 2011.

Will the Microsoft earnings report due on Thursday finally be the one that justifies the big gain in the stock, or will the news end up convincing the market that MSFT is dead money until further notice?

Anyone who owns Microsoft stock right now has a great deal to think about before Thursday’s close.

Earnings Estimates for MSFT

For perspective, analysts currently believe the earnings figures will show a profit of 49 cents per share of Microsoft stock, down from the year-ago bottom line of 62 cents per share. Nevertheless, the earnings announcement is expected to show an 18.8% increase in the top line, from last year’s $18.53 billion to $22.02 billion this time around.

Just for the record, however, the software company fell short of estimates last quarter. In fact, Microsoft earnings have fallen short of estimates in three of the past eight quarters. It could have been worse, but given the organization’s stature, it should have been better.

While it’s unlikely the corporation will see a need to adjust full-year estimates just one quarter into the year, for perspective, Microsoft is expected to generate $99.1 billion in revenue this year, up 14.1% from last fiscal year’s total. Income is expected to reach $2.72 per share of Microsoft stock in fiscal 2015, up 3.3% from the previous year’s total.

Food for Thought for Owners of Microsoft Stock

While the numbers are sure to be scrutinized, anyone who owns or is thinking about buying Microsoft before or after the official Microsoft earnings announcement should know three key themes are weighing on the price of MSFT:

  • First, perhaps the biggest question mark with Microsoft at this time is the company’s role as a player in the cloud. The transition from a Windows OS-centric company to one also competing in mobile and cloud computing is easily CEO Satya Nadella’s biggest and boldest move since taking the helm in February of this year. Yet, the transition still inspires more questions than answers. MSFT shareholders should pay close attention to management commentary in the earnings announcement and conference call for additional clarity about these initiatives.
  • Aside from cloud and mobile, followers of Microsoft stock also want to keep their eyes and ears open for clues surrounding the eventual debut of a Microsoft-made wearable device — a smartwatch, to be specific — which takes dead aim at the Apple (AAPL) iWatch. Little has been said about it, but one key data nugget that has been passed along is that such a watch would work with non-Windows smartphones. The watch is expected out in time for this year’s holiday shopping season.
  • Last but not least, although Microsoft is wading waist-deep in the waters of cloud computing, Windows isn’t going away. The company is making a big bet its operating system will actually be seen by consumers as something desirable rather than something to avoid following the disappointing reception of Windows 8. In fact, the next iteration of the operating system is going to be so radically different (and hopefully better), Microsoft is skipping the use of Windows 9 and going straight to Windows 10. The hope is Windows 10 will renew demand from enterprise-level users who were opting for Windows 7 rather than the newer Windows 8.

Microsoft Earnings Call

Whatever’s in the cards, it will all be shared Thursday afternoon in the Microsoft earnings conference call/webcast. It will begin at 5:30 p.m. EST, and can be accessed here. The actual Q1 figures for MSFT will likely be posted as a press release between the market’s 4 p.m. close and the 5:30 p.m. start time for the call/webcast.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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