Microsoft Corporation (MSFT): Q1 EPS Falls Over 20%

Microsoft Corporation (NASDAQ:MSFT) reported its first quarter financials after the closing bell today. On the earnings front, the tech giant reported net income of $4.47 billion, or 53 cents a share. The results are a 22.1% decline from the first quarter of fiscal 2012, where Microsoft reached earnings of 68 cents a share. Unlike last year, when EPS met consensus, analysts were actually expecting the company to come in with a bottom line of 56 cents a share.

The 5.4% earnings miss end’s Microsoft’s string of three straight quarterly beats, which propelled the company to a full year FY 2012 EPS of $2.78. Last year’s totals came in 3.1% above consensus estimates, and were 3.3% above FY 2011 earnings. By the end of this year, early consensus is expecting Microsoft to come in with earnings of $3.01, which would be an 8.3% increase from last year.

Despite the miss, Microsoft has some positive growth drivers going forward, most notably its release of the Windows 8 OS next Friday. After trading relatively flat on the day, the stock is down over 2% in after hours trading, and currently sports a P/E ratio that is 7.2% above its five-year historical average of 13.8X. Book and sales valuation metrics, though, show an undervaluation of 15-30%. Factoring in its EPS growth prospects, Microsoft trades at a modest PEG of 1.67.

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