Sneak Peek: Expectations Running High For Microsoft (MSFT)

Earnings Estimates (High/Mean/Low): $0.53 / $0.464 / $0.42

Microsoft (NASDAQ: MSFT) is expected to report significant YOY gains when it reports FQ4 earnings this Thursday after the bell.  Mean estimates are currently pegged at $0.464 on revenue of $15.3 billion, well ahead of year-ago earnings of $0.36 and $13.1 billion.

The enthusiasm for the Q is fueled largely by data indicating improvements in demand for new computers outfitted with the company’s software.  Such sentiment was boosted in no small part by Intel’s (NASDAQ: INTC) Q2 earnings release last week.  In it, the chip giant seemed to indicate that businesses and consumers are accumulating new computers, most of which are loaded with Microsoft software, at a healthy clip.

Indeed, one analyst who has a $37 target on shares stated that “Intel’s earnings reaffirm a few things that we have been highlighting.”  He added that, “in particular, businesses are buying new computers and demand for pared-down netbook computers remains strong, as does demand for higher-end servers.”

Despite rallying upwards of 10% over the past couple of weeks, shares of MSFT remain nearly 21% below recent highs.  With shares yielding over 2%, it’s easy to see why the Street remains largely bullish of the stock.  However, all is far from well at the company, as they’ve seemingly swung-and-missed at every “killer app” they’ve tried to produce for what has felt like a very, very long time.  Windows 7 seems to be bucking this trend, but Mr. Softy will need to do more if it wants to break back into the mid-30s and beyond.

MSFT’s report is sure to move the market and should be followed attentively by any responsible investor.  You’d probably be best off not accumulating shares ahead of the report as they’re liable to sell off for any number of reasons following the release, but, generally speaking, shares do seem attractive at current levels.

Disclosure: No holdings in MSFT.

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