The Zacks Analyst Blog Highlights: Apple, Microsoft, Visa, Qiwi and Moody's

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Jul 23, 2014, 09:30 ET

CHICAGO, July 23, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Apple (Nasdaq:AAPL-Free Report), Microsoft (Nasdaq:MSFT-Free Report), Visa Inc. (NYSE:V-Free Report), Qiwi Plc (Nasdaq:QIWI-Free Report) and Moody's Corp. (NYSE:MCO-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday's Analyst Blog:

Apple, Microsoft Report Mixed Earnings

After the bell Tuesday, tech behemoths Apple (Nasdaq:AAPL-Free Report) and Microsoft (Nasdaq:MSFT-Free Report) reported quarterly earnings in what is now the thick of earnings season. Apple posted earnings per share of $1.28 on $37.4 billion in revenues, while Microsoft achieved a big sales beat while missing by 2 cents per share on the bottom line.

While Apple CEO Tim Cook praised his company's "best execution of any quarter" since he's been with the company, gross margin improved better than expected to 39.4%, and the company's year-over-year growth rate of 28% is the best Apple has posted in two years. One area in which Apple saw success in its fiscal Q3 was China, which was up 48%.

Where Apple showed some lag in sales was domestically, where savvy Apple customers are likely awaiting a new iPhone release this fall. The company sold 35.2 million iPhones in the quarter just reported, which was slightly above expectations (some analysts bullish on AAPL were expecting a big beat here). iPad sales underperformed in the quarter, selling 13.3 million units.

Microsoft's modest earnings miss in its fiscal Q4 may not concern investors, as the company has kicked off a major transitional phase following its acquisition of phone-maker Nokia and its subsequent shedding of workforce. Microsoft's Commercial business was nearly twice the size of Devices, which explains the company's increased focus on cloud-based solutions.

Microsoft CEO Satya Nadella has already made news recently by announcing the layoff of 18K Microsoft workers, many of whom came from the Nokia buyout. In today's earnings report it was articulated that 13K of these workforce layoffs would occur in the current quarter. However, this development does not impact the current quarter.

Both Apple and Microsoft are currently Zacks Rank #3 stocks, reflecting mixed analyst estimate revisions during the past quarter. Apple's guidance for its Q4 was slightly higher than the consensus, while Microsoft should be providing guidance on its ongoing earnings call. Year over year, AAPL shares are up more than 50%, and Microsoft +40%.

Can Visa (V) Beat Earnings Estimates This Quarter?

Global electronic payment processing giant – Visa Inc. (NYSE:V-Free Report) is scheduled to release its third-quarter of fiscal 2014 financial results after the closing bell on Jul 24.

In the last reported quarter, the company had delivered a 0.5% positive earnings surprise, while the four-quarter trailing average beat stands at 2.5%. Now let us see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Visa is likely to beat earnings as it has the required combination of two key components.

Zacks ESP: Visa has a positive Zacks ESP. That is because Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate of $2.11 per share and the Zacks Consensus Estimate of $2.09, is +0.96%.

Zacks Rank: Visa has a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. Conversely, Sell-rated stocks (#4 and 5) are never considered going into an earnings announcement.

The combination of Visa's Zacks Rank #2 and +0.96% ESP raise the prospect of an earnings beat on Jul 24.

What is Driving the Better-than-Expected Earnings?

Visa is likely to generate better-than-expected growth from its diversified business portfolio, and benefit from its strong global exposure and effective marketing efforts. Meaningful alliances and technology upgrades initiatives within online merchant payment services and prepaid card spaces that were executed during the quarter, are also projected to drive growth.

Meanwhile, the new sanctions in Russia is not likely to affect Visa's operations, thereby alleviating a major regulatory headwind for the company. About 2% of annual revenues are generated from Russia. Alongside, Visa continues to be debt-free, which augurs decent liquidity and capital deployment, leading to incremental shareholder value.

Although headwinds such as expenses, currency fluctuations, difficult comps and regulatory challenges from quite many jurisdictions are reflected in the company's tepid guidance, Visa is expected to exit fiscal 2014 on an optimistic note.

Excluding a 2% reduction due to negative impact of foreign currency, Visa's top-line growth guidance is in low double-digits, while its bottom-line is projected to grow in the mid-to-high teen range in fiscal 2014, lower than 22% growth recorded in fiscal 2013.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Qiwi Plc (Nasdaq:QIWI-Free Report) has Earnings ESP of 4.8% and a Zacks Rank #1 (Strong Buy).

Moody's Corp. (NYSE:MCO-Free Report) has Earnings ESP of +6.1% and a Zacks Rank #3 (Hold).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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