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Microsoft Sales, Earnings Seen Falling In June Quarter

Analysts predict Microsoft on Tuesday will report its first decline in EPS in five quarters and fourth drop in sales in the last five quarters. (Microsoft)

Microsoft's (MSFT) path to growth is expected to take a detour with its fiscal fourth-quarter earnings report, due out after the close Tuesday.

Analysts polled by Thomson Reuters expect the software giant to earn 58 cents a share, down 3% year over year, on sales of $22.14 billion, down a fraction, in the June quarter.

It would mark the first decline in EPS in five quarters and the fourth drop in sales in the last five quarters.

Microsoft is transitioning from a company focused on client-server software to one focused on internet cloud computing services.

Since its last earnings report, Microsoft announced plans to buy professional network site LinkedIn (LNKD) for $26.2 billion. Plus, in May, Microsoft took a $950 million impairment and restructuring charge to streamline its smartphone business.

Microsoft stock dipped a fraction to 53.70 on Friday. It was the stock's first down day in the last nine trading sessions.


IBD's TAKE: Microsoft stock has climbed nine of the last 11 trading sessions since breaking through its 50-day moving average line on June 30. But Microsoft stock has a middling IBD Composite Rating of 42. For more stock analysis, consult the IBD Stock Checkup.


For the September quarter, Microsoft's fiscal Q1, analysts are modeling for the company to earn 69 cents a share on sales of $22.14 billion. That would translate to year-over-year growth of 3% in EPS and 2% in sales.

In a note Friday, BMO Capital Markets analyst Keith Bachman said Wall Street's consensus estimates for Microsoft's September quarter appear too high.

"We think Microsoft will make the June quarter, with some upside tension, but guide lower, which seems to be a consistent pattern," Bachman said. "We believe that investors expect numbers to move lower. Nevertheless, we would expect to see the shares come under some pressure, given the recent positive stock move."

Bachman said he is concerned that Microsoft is generating all of its operating profit growth from its legacy More Personal Computing division, which he thinks isn't sustainable.

Bachman reiterated his outperform rating on Microsoft stock with a price target of 57.

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