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Microsoft Corp. (MSFT - Analyst Report) is set to report first-quarter fiscal 2014 results on Oct 24. Last quarter, it posted a 21% negative surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Microsoft’s fourth-quarter earnings of 59 cents missed the Zacks Consensus Estimate by 15 cents due to a dismal performance in the Windows segment. Revenues of $19.89 billion were also down sequentially. Additionally, gross margins decreased sequentially due to the change in sales mix, which favored lower-margin products.

The extent of decline in Microsoft’s Windows segment in the last quarter does not bode well for the next few quarters although the company’s recent restructuring and refocus could get it through these difficult times.

Earnings Whispers?

Our proven model does not conclusively show that Microsoft will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  The Most Accurate estimate stands at 53 cents while the Zacks Consensus Estimate is higher at 54 cents. That is a difference of -1.85%.

Zacks Rank #4 (Sell): We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Our model states that a stock needs to have both a positive earnings ESP and a Zacks Rank #1, #2 or #3 to beat earnings estimates. You could, therefore, consider other stocks like:

Melco Crown Entertainment Limited (MPEL - Snapshot Report), with Earnings ESP of +6.45% and a Zacks Rank #1 (Strong Buy).

Kemper Corporation (KMPR - Snapshot Report), with Earnings ESP of +39.54% and a Zacks Rank #1 (Strong Buy).

SY Bancorp Inc. (SYBT - Snapshot Report), with Earnings ESP of +4.08% and a Zacks Rank #1 (Strong Buy).

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