Microsoft Earnings Preview

Microsoft is scheduled to report earnings this evening. The Street is expecting revenues of $19.17 billion and EPS of $0.68

The March quarter is estimated to produce $16.06 billion in revenues and EPS of $0.56. This suggest a cautious tone as the historical revenue decline have averaged 10% versus the 16% decline implied by the Street guidance. Street sentiment is positive on the stock with several analysts believing that estimates are too low and need to come up.

The stock's valuation is attractive, free cash flow trends are favorable, and the balance sheet is bullet proof. However, the shares have largely underperformed the market over the past year. Investors will be looking for signs within the quarter and the call that would cause multiples to expand.

Key for the call would be:

1. Tablet cannibalization
2. Cloud offerings and traction
3. Kinect sales
4. Usage of the balance sheet