Post Earnings Coverage as Microsoft Beats Topline and Bottomline Estimates

LONDON, UK / ACCESSWIRE / October 27, 2016 / Active Wall St. announces its post-earnings coverage on Microsoft Corp. (NASDAQ: MSFT). The company reported its financial results for the first quarter fiscal 2017 on October 21, 2016. The software giant posted better-than-expected results and top- and bottom-lines grew on y-o-y basis. Register with us now for your free membership at: http://www.activewallst.com/register/.

Today, AWS is promoting its earnings coverage on MSFT. Get our free coverage by signing up to http://www.activewallst.com/registration-3/?symbol=MSFT.

Earnings Reviewed

For the three months ended on September 30th, 2016, Microsoft reported revenue of $20.5 billion, which was higher by 0.4% billion and $22.3 billion on an adjusted basis. The company posted Q1 FY17 operating income of $5.2 billion and $7.1 billion on an adjusted basis. Microsoft posted net income of $4.69 billion, or $0.60 per share, for Q1 FY17 compared to net income of $4.9 billion, or $0.61 per share, in the year ago period. Excluding the impact of revenue deferrals and restructuring charges, adjusted earnings came in at $0.76 per share, which comfortably surpassed analysts’ estimates of $0.68 per share and revenue of $21.7 billion.

Segment Overview

For Microsoft’s Productivity and Business Processes’ revenue grew 6% to $6.7 billion, primarily due to higher revenue from Office 365. Office commercial products and cloud services revenue grew 5% driven by Office 365 commercial revenue growth of 51%. The segment’s Office consumer products and cloud services revenue grew 8% and Office 365 consumer subscribers increased to 24.0 million. Dynamics products and cloud services revenue grew 11% driven by Dynamics online revenue growth revenue increased $352 million or 6%. Office Commercial revenue increased $264 million, or 5%, driven by higher revenue from Office 365 commercial; revenue included an unfavourable foreign currency impact of 3%. Operating income decreased slightly, primarily due to higher operating expenses. Gross margin was flat, reflecting higher cost of revenue, offset by higher revenue. Cost of revenue increased $353 million, or 34%, driven by an increased mix of cloud offerings.

During Q1 FY17, Microsoft’s Intelligent Cloud segment revenue grew $490 million, or 8%, due to higher revenue from server products and cloud services. The segment’s Server products and cloud services revenue grew $486 million, or 11%, driven by Azure revenue growth of 116%, as well as growth in revenue from server products licensed on-premises. Enterprise Services revenue increased 1%, driven by growth in revenue from Premier Support Services and Microsoft Consulting Services, offset in part by a decline in revenue from custom support agreements. Operating income decreased $333 million, or 14%, primarily due to higher operating expenses. Gross margin increased $75 million, or 2%, mainly due to higher revenue, offset in part by higher cost of revenue.

For Q1 FY17, Revenue in Microsoft’s More Personal Computing division declined 2% to $9.3 billion, mainly due to lower revenue from Devices and Gaming, offset in part by higher revenue from Search advertising. Devices revenue decreased $493 million or 27%. Phone revenue decreased $799 million or 72%, driven by a reduction in volume of phones sold. Surface revenue increased $253 million or 38%, primarily driven by a higher mix of premium devices sold.

During Q1 FY17, the Gaming segment revenue decreased $110 million or 5%, primarily due to lower Xbox hardware revenue, offset in part by higher revenue from Xbox software and services. Search advertising revenue increased $409 million or 40%. Search advertising revenue, excluding traffic acquisition costs, increased 9%, primarily driven by growth in Bing, due to higher revenue per search and search volume. Windows revenue increased slightly, mainly due to higher revenue from patent licensing. Windows OEM licensing revenue was flat, slightly ahead of the PC market.

Operating income increased $401 million or 26%, primarily due to lower operating expenses. Gross margin decreased slightly, reflecting lower revenue, offset in part by a reduction in cost of revenue.

Share Repurchase

Microsoft returned $6.6 billion to shareholders in the form of share repurchases and dividends in Q1 FY17. During the reported quarter, the company announced an 8% increase in its quarterly dividend to $0.39 per share, a new share repurchase program authorizing up to $40 billion in share repurchases, and reaffirmed it is on track to complete its current $40 billion share repurchase program by December 31, 2016.

LinkedIn Update

Microsoft expects to close the acquisition of LinkedIn Corporation (NYSE: LNKD). Post-closing of the transaction, the company will report LinkedIn results in the Productivity and Business segment. Microsoft is also expecting to introduce the sale of its entry-level feature phone business in Q2 FY 17, subject to regulatory approvals and other closing conditions.

Outlook

Microsoft did not provided earnings target for the coming quarter; however the company is forecasting sales of $25.05 billion, based on the midpoint of its guidance.

Stock Performance

Microsoft’s share price finished yesterday’s trading session at $60.63, marginally sliding 0.59%. A total volume of 29.91 million shares exchanged hands, which was higher than the 3 months average volume of 24.88 million shares. The stock has advanced 4.62% in the last month, 8.54% in the past three months, and 23.12% in the previous six months. Furthermore, since the start of the year, shares of the company have gained 11.53%. The stock is trading at a PE ratio of 28.84 and has a dividend yield of 2.57%.

Active Wall Street:

Active Wall Street (AWS) produces regular sponsored and non-sponsored reports, articles, stock market blogs, and popular investment newsletters covering equities listed on NYSE and NASDAQ and micro-cap stocks. AWS has two distinct and independent departments. One department produces non-sponsored analyst certified content generally in the form of press releases, articles and reports covering equities listed on NYSE and NASDAQ and the other produces sponsored content (in most cases not reviewed by a registered analyst), which typically consists of compensated investment newsletters, articles and reports covering listed stocks and micro-caps. Such sponsored content is outside the scope of procedures detailed below.

AWS has not been compensated; directly or indirectly; for producing or publishing this document.

PRESS RELEASE PROCEDURES:

The non-sponsored content contained herein has been prepared by a writer (the “Author”) and is fact checked and reviewed by a third party research service company (the “Reviewer”) represented by a credentialed financial analyst, for further information on analyst credentials, please email info@activewallst.com. Rohit Tuli, a CFA® charterholder (the “Sponsor”), provides necessary guidance in preparing the document templates. The Reviewer has reviewed and revised the content, as necessary, based on publicly available information which is believed to be reliable. Content is researched, written and reviewed on a reasonable-effort basis. The Reviewer has not performed any independent investigations or forensic audits to validate the information herein. The Reviewer has only independently reviewed the information provided by the Author according to the procedures outlined by AWS. AWS is not entitled to veto or interfere in the application of such procedures by the third-party research service company to the articles, documents or reports, as the case may be. Unless otherwise noted, any content outside of this document has no association with the Author or the Reviewer in any way.

NO WARRANTY

AWS, the Author, and the Reviewer are not responsible for any error which may be occasioned at the time of printing of this document or any error, mistake or shortcoming. No liability is accepted whatsoever for any direct, indirect or consequential loss arising from the use of this document. AWS, the Author, and the Reviewer expressly disclaim any fiduciary responsibility or liability for any consequences, financial or otherwise arising from any reliance placed on the information in this document. Additionally, AWS, the Author, and the Reviewer do not (1) guarantee the accuracy, timeliness, completeness or correct sequencing of the information, or (2) warrant any results from use of the information. The included information is subject to change without notice.

NOT AN OFFERING

This document is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Please read all associated disclosures and disclaimers in full before investing. Neither AWS nor any party affiliated with us is a registered investment adviser or broker-dealer with any agency or in any jurisdiction whatsoever. To download our report(s), read our disclosures, or for more information, visit http://www.activewallst.com/disclaimer/.

CONTACT

For any questions, inquiries, or comments reach out to us directly. If you’re a company we are covering and wish to no longer feature on our coverage list contact us via email and/or phone between 09:30 EDT to 16:00 EDT from Monday to Friday at:

Email: info@activewallst.com
Phone number: 1-858-257-3144

Office Address: 3rd floor, 207 Regent Street, London, W1B 3HH, United Kingdom

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

SOURCE: Active Wall Street

ReleaseID: 447799