Microsoft Analysis: Dow Earnings

BOSTON (TheStreet) -- Microsoft (MSFT) has reported quarterly results.

Quarterly Synopsis: Microsoft's fiscal second-quarter GAAP revenue climbed 5% to $20 billion, a record. Earnings per share rose 4% to 77 cents. The company's operating margin declined from 45% to 41%, hurt by one-time gains in the year-ago quarter. The entertainment and devices unit grew revenue 55%, helped by solid holiday sales of Xbox 360 and quicker-than-anticipated adoption of the Kinect sensor for that product. The business division boosted sales 24%, helped by outstanding sales of Office 2010, now the fastest-selling consumer version in product history. Microsoft has sold 300 million Windows 7 licenses to-date. Bing is gaining market share.

Earnings Performance: Microsoft delivered 77 cents of adjusted earnings per share, representing 4.1% year-over-year growth and exceeding the Wall Street consensus estimate by an impressive 13%. By comparison, Microsoft has an average earnings beat rate of 5.9%. The company has now beaten expectations in eight consecutive quarters, but by widely differing margins. Microsoft's top-line figure passed the consensus target by 4.2%. The company has an average sales beat rate of 1.2%. It has beaten sales forecasts in five consecutive quarters.

Dividend Information: Microsoft pays a quarterly dividend of 16 cents, converting to an annual yield of 2.2%. The company has boosted the distribution 5.8% in the past 12 months and 10% and 11% annually, on average, over three- and five-year horizons.

Credit Suisse, Outperform, $36 Target
Deutsche Bank, Buy, $35 Target
UBS, Buy, $35 Target
Citigroup, Buy, $32 Target
JPMorgan, Neutral, $30 Target
Barclays, Equal Weight, $29 Target
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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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