Although Microsoft (MSFT – Free Report) has been a leader in the PC market for decades, changing consumer behavior has sent the tech giant into a state of transition over the past few years. Nevertheless, the company’s ability to stay competitive and continue to post earnings and sales growth underscores the success of its evolution.
Just take a look at Windows 10. Regardless of how you feel about Microsoft’s rather spammy efforts to get users to upgrade, it is worth noting that a major software company was offering the latest version of its flagship program for free.
Indeed, Microsoft can no longer rely on Windows sales for company-wide growth. The Redmond, Washington-based company is now a leader in the enterprise and consumer-level cloud business and has shifted its focus to this and several other newer ventures.
With that said, Microsoft is set to report is second-quarter earnings results in about two weeks. With its acquisition of LinkedIn (LNKD) fully completed last month and the tech industry facing the uncertainty of a Trump presidency, it would be huge for Microsoft to post an earnings beat when its announces.
So how do we go about predicting a beat? Well, Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their next earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate, which helps us get a sense of what analysts are expecting based on the most up-to-date information.
With Microsoft’s Most Accurate Estimate sitting at 79 cents per share and its Zacks Consensus Estimate at 78 cents, our Earnings ESP for the company currently sits at +1.28%. Although the stock only has a Zacks Rank #3 (Hold), this positive Earnings ESP makes it easier to predict a positive surprise.
It’s also worth mentioning that Microsoft has seen three positive estimate revisions over the past 30 days, and the company currently holds “A” grades for Growth, Momentum, and VGM.
While there are no guarantees on the stock market, it certainly looks like Microsoft is in a strong position headed into its report. As always, investors will want to keep an eye on this one.
Also, don’t forget to check out this week’s episode of the Zacks Friday Finish Line, a news roundup style podcast featuring Zacks writers:
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