Microsoft, Inc. (MSFT) just hit a new multi-year high on better than expected Q3 results that included a 7% earnings surprise on strong sales from its new Windows 7 operating system. With a forward P/E of just 15X and a solid next-year growth projection of 11.5%, shares look well positioned for more gains.
Third-Quarter Results
Microsoft kept the recent string of strong earnings surprises in tact with better than expected Q3 results from April 22. Revenue was up 6% from last year to $14.5 billion. Earnings also came in strong at 45 cents per share, 7% ahead of the Zacks Consensus Estimate. Microsoft has been consistent over the last year with an average earnings surprise of 19%.
Microsoft’s results were driven by a strong showing from both consumer and corporate customers, with consumer OEM’s (original equipment manufacturer) seeing big gains in sales of smaller products like laptops and netbooks. The company also saw early signs of a return to enterprise spending growth from corporate accounts, something other large-scale hardware and software makers have mentioned, which could signal the early stages of a hardware refresh cycle.
Windows 7 A Big Success
In terms of products and segments, Microsoft continues to see strong results from its Windows 7 operating system, helping its Client segment post 30% Y-o-Y sales growth, accounting for 30% of quarterly revenue.
Estimates
With the Q3 results just hitting the Street a few days ago, we haven’t seen much movement in estimates, but with a forward P/E multiple of 15X, shares of MSFT are trading at the lower end of their historical range. The next-year estimate is pegged at $2.25, an 11.5% growth projection.
The Chart
MSFT just hit a new multi-year high at $31.58 on the solid quarter after spending most of the last 18 months trending higher. Look for support at the trend line on any sign of a pullback. Take a look below.
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Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service. Zacks Investment Research
