Microsoft Corporation (NASDAQ:MSFT) and Yahoo! Inc. (NASDAQ:YHOO): How’s the Earnings Front?

Yahoo Inc (YHOO) Marisa Mayer

Microsoft Corporation will report fiscal fourth-quarter numbers after Tuesday’s close of trade. Wall Street is mostly upbeat about the performance of the company, despite massive write down of Nokia’s handset business.

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Microsoft’s commercial revenue is central

Excluding one-time items, Microsoft Corporation is projected to report an increase in earnings per share to 56 cents from 55 cents in the year ago period. Sales could snap a four-quarter streak of y-o-y increases, and will likely decline to $22.07 billion from $23.38 billion in the same period a year ago. Commercial revenue is forecast to rise 1 percent from a year ago to $13.63 billion.

“While commercial cloud is only 6 percent of revenue, it stands apart from the field due to its powerful organic growth trajectory,” J.P. Morgan wrote in a research note to clients.

However, repeating third-quarter’s performance could be a tall order, when the stock rallied over 10 percent as earnings and sales, including revenue from the closely watched commercial division, easily beat the average analysts’ estimates.

Shares of Microsoft Corporation , which are a component of the Dow Jones Industrial Average, have soared more than 9 percent in the last three months, vastly outperforming the DJIA’s 0.5 percent gain. Investors are gearing for another bullish set of numbers, as the stock has run up close to 5 percent in the past couple of weeks.

Focus Shifting Back to Yahoo’s Core Operations

Yahoo! Inc. is all set to release second-quarter results after the market closes on Tuesday. The consensus of analysts covering the stock is for adjusted earnings of 18 cents per share, compared to 37 cents per share in the year-ago quarter.

The company is expected to report revenue of $1.03 billion, below the $1.04 billion it recorded a year earlier. Revenue from search is expected to be around $429.8 million, while display should rake in about $374.4 million.

Last Friday, Yahoo! Inc.   officially filed to spin off its stake in Alibaba, which should generate value for shareholders. But the flip side is that more and more investors will now focus on Yahoo’s core operation.

However, things seem to have turned around lately, with some positive acquisition news, and the announcement of a search partnership with Mozilla.

Shares of Yahoo! Inc. are down 11 percent in the past three months, versus a 2 percent gain in the S&P 500. Year-to-date, shares have fallen 21 percent, compared with the S&P 500’s marginal 3 percent rise.

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