Microsoft MSFT will release its fourth quarter fiscal 2020 financial results on Wednesday, July 22. Even as we ramp up and head deep into the busy part of the quarterly earnings season that will see Tesla TSLA and others report, many eyes will be focused on the tech giant that’s more important to Wall Street than ever before.
The Simple Story
Microsoft shares have surged 28% in 2020 and 50% in the last 12 months to outpace its industry’s 25% climb. This is part of a larger run that has seen MSFT jump 175% in the past three years and 330% in the last five years to top Apple’s AAPL 190%.
MSFT’s run, which has boosted its market cap to over $1.5 trillion, has been driven by its cloud computing expansion where it’s now a leader within the booming growth industry alongside Amazon AMZN. Microsoft’s Intelligent Cloud revenue jumped 27% for the second period in a row last quarter.
Microsoft’s cloud division pulled in the most of its three units in Q3 FY20, while its Office-heavy Productivity and Business Processes segments continue to expand.
For instance, its Office 365 suite remains vital to businesses, governments, schools, and consumers. Plus, its stay-at-home offerings compete against Slack WORK, Zoom ZM, and others. And its next-generation Xbox is due out in the 2020 holiday season.
Outlook
Looking ahead, our Zacks estimates call for MSFT’s adjusted Q4 earnings to pop 2.2% on 8.5% higher revenues. Overall, MSFT’s fiscal 2020 revenue is projected to jump 12.5% and another 10% in FY21.
Meanwhile, its adjusted EPS figures are projected to surge 20% and 9.4%, respectively over this stretch. This growth would come in below recent periods, but is still strong and even more impressive given the broader economic circumstances.
Microsoft has easily topped our earnings estimates in the trailing four quarters and its bottom-line revisions have trended upward recently. MSFT is currently a Zacks Rank #3 (Hold) that rocks a “B” grades for Growth and Momentum in our Style Scores system.
Bottom Line
It’s always risky to play stocks for near-term gains following earnings. And Microsoft could face a post-release pullback even if its results are strong because investors might decide to take home some profits on a stock that’s up 50% since March 23.
MSFT shares are down around 5% from its recent highs at the moment, and longer-term investors don’t need to find the best entry points because it seems reasonable to think that around $200 a share for Microsoft will appear like a steal a year or two from now.
Let’s not forget that Microsoft’s 1% dividend yield tops the 10-year Treasury’s 0.63%. And Microsoft is poised to weather nearly any economic storm, as it held over $137 billion in cash and equivalents at the end of last quarter. The tech powerhouse is also likely to continue to buy back a ton of stock.
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