Is Microsoft Ready to Continue Its Earnings Success?

If you’re looking for a stock that could keep its earnings-beat performance, you might want to pay attention to Microsoft (MSFT) in the Zacks Computer – Software industry. This technology giant has consistently outperformed expectations in its earnings reports.

Strong Earnings History

Historically, Microsoft has shown an impressive ability to exceed earnings estimates, particularly in its last two quarters. The company recorded an average surprise of 3.18% over this period.

In its last reported quarter, Microsoft announced earnings of $2.95 per share, which exceeded the Zacks Consensus Estimate of $2.90 per share, resulting in a surprise of 1.72%. In the quarter prior, it surpassed an expected $2.81 per share by delivering earnings of $2.94, achieving a surprise of 4.63%.

Analyzing Price and EPS Trends

Given this history, recent estimates for Microsoft’s performance have been trending upward. Currently, the Zacks Earnings ESP (Expected Surprise Prediction) for Microsoft is in positive territory, indicating good potential for an earnings beat, especially when paired with its favorable Zacks Rank.

Research shows that stocks with a positive Earnings ESP and at least a Zacks Rank of #3 (Hold) tend to achieve a positive surprise nearly 70% of the time. This means that out of ten stocks exhibiting this combination, about seven may surpass the consensus estimate.

The Zacks Earnings ESP assesses the Most Accurate Estimate against the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is an adjusted version of the Consensus that takes into account the latest analyst revisions, reflecting the most current outlook for the company.

Currently, Microsoft holds an Earnings ESP of +0.35%, indicating that analysts are optimistic about its near-term earnings potential. Combined with a Zacks Rank #3 (Hold), this suggests a potentially successful earnings report on the horizon, with the next announcement scheduled for October 30, 2024.

Understanding Earnings Predictions

While a negative Earnings ESP can reduce predictive reliability, it doesn’t necessarily mean a company will miss its earnings target. Many firms often exceed consensus EPS estimates for reasons beyond predictions. Moreover, some stocks can remain stable even if they fail to meet these estimates.

Consequently, evaluating a company’s Earnings ESP before quarterly reports can significantly improve investment decisions. Utilizing the Earnings ESP Filter can help identify the best stocks to buy or sell before earnings announcements.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.