Profit calls will be the focus for many tech companies this week. Microsoft Corporation (NASDAQ:MSFT) will not be an exception. This Thursday will see the US software giant share its third-quarter results. Optimism surrounds the company and its shares, making MSFT stock reach for a steady $70. From positive EPS growth to incoming gadgets, here is a look at 7 major items to look out for this week.
In contrast to Q3 2016, industry watchers look forward to a $1.5 billion rise in Microsoft revenues. FactSet projects an average revenues figure of $23.6 billion to be shared this week. On average, MSFT is also recognized as “Overweight” according to the 36 ratings collected by FactSet. The analyst entity reports a mean price target of $70,13.
Estimize’s revenue projection is slightly less confident at $23.3 billion.
Earnings per Share
Predictions suggest that Microsoft Corporation will reveal an earnings per share (EPS) increase of 8 cents this week, compared to Q3 2016. The American tech company reports its earnings on Thursday along with a number of other tech giants. Analyst consensus pegs the company’s EPS at 70 cents, according to Market Watch.
The last three MSFT earnings calls surpassed analyst predictions. However, Q3 last year saw the company fail to meet estimates. Once again, bullish optimism is rife across the board and according to Estimize research, Microsoft could reveal EPS of 72 cents.
The quarter also shows that Microsoft Corporation (NASDAQ:MSFT) overtook the S&P 500. Compared to the 4 percent gain made by the index, MSFT has risen 6 percent over the last three months. Looking the last 4 weeks alone, the S&P 500 only rose 1 percent. Meanwhile, the makers of Windows have seen their shares grow by 4 percent this past month.
MSFT Productivity offerings
Momentum is soaring behind Microsoft’s corporate processes and productivity services. This is backed by analysts at MKM Partners. The entity indicates that products like Office 365 are seeing increases in subscription numbers. It is this business segment, backed by the company’s cloud expertise, that is expected to allow Microsoft to meet, if not surpass, earnings estimates.
The financial Q3 period stands to offer an exceptional spike in Microsoft server transactional revenue. Analysts at Stifel support this view. They claim the company’s launch of Windows and SQL server products will turn over incomes better than anticipated.
The Windows giant has a large and momentous cloud computing platform as well. Today, Azure gives web juggernauts like Google Cloud and Amazon Web Serves a good run for their money. Microsoft Corporation should see its intelligent cloud business expand by 8 percent according to Stifel.
MSFT benefits from LinkedIn
A close eye must be kept on LinkedIn too. The Christmas quarter had Microsoft finalize the professional social network’s $26 million purchase. It has been the first complete quarter the platform spent under MSFT since its adoption in Decemeber 2016. MKM Partners is adamant more than $900 million will be derived from LinkedIn for Q3.
However, despite the optimism, the company has previous admitted that EPS will be diluted by 1 percent for both 2017 and 2018 due to the acquisition
Microsoft hardware developments
On the topic of hardware. There is talk in circulation regarding a new laptop next week. Whether the gadget will be an addition to the Surface Book range or an all new line-up is yet to be seen. Although, talk is rife about Microsoft’s intent to rival Google more directly with a Chromebook counter product. Analyst see a considerable upside to this device segment as Microsoft promises to place added focus on education and cloud software markets.
Industry damages Microsoft
There are a few industry changes which could potentially hurt earnings though. Despite the upsides for MSFT there a two looming shifts that might unsettle the firm. The first is the recently adopted revenue regulation created by the Financial Accounting Standards Board. It will make comparisons to previous financial period a lot more tricky among other drawbacks. Microsoft Corporation’s (NASDAQ:MSFT) legacy units also stand to be negatively affected by guidance for gross margins.