The Zacks Analyst Blog Highlights: Microsoft, Nokia, Intel, Sony and Royal Dutch Shell

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Apr 29, 2011, 10:02 ET

CHICAGO, April 29, 2011 /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: Microsoft Corp. (Nasdaq: MSFT), Nokia (NYSE: NOK), Intel (Nasdaq: INTC), Sony (NYSE: SNE) and Royal Dutch Shell plc (NYSE: RDS.A).

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Here are highlights from Thursday's Analyst Blog:

Microsoft Beats, but Modestly

Microsoft Corp. (Nasdaq: MSFT) reported fiscal 3rd quarter earnings after the closing bell today. On the headline things look pretty good -- EPS of 61 cents per share topped the Zacks Consensus Estimate of 56 cents, and revenues of $16.43 billion beat the $16.19 billion expected.

However, the earnings beat is tied to a tax benefit worth 5 cents per share, which can thus be seen as Microsoft merely meeting expectations. Sales in the Consumer and Entertainment & Devices businesses were lackluster while the Business side was better than expected. Year over year, Microsoft posted a 30.6% net income gain and a 13.27% increase in revenue growth.

All the pressure on MSFT stock over the past 30 days has been downward. Seven of 26 estimates have been revised lower, though by negligible percentages. Today's earnings beat of 8.9% is slightly below the average over the previous four quarters of 10.41%.

Traders in the after-market have been selling Microsoft on the news. Though the stock was up 33 cents per share (1.25%) in regular trading Thursday, since the company's announcement MSFT shares have fallen 52 cents (1.95%) -- more than giving back the gains made early in the day.

Ultimately, the Microsoft story is currently looking toward the future -- specifically its joining forces with Nokia (NYSE: NOK), the presence of a tablet product on the market and continuing growth in emerging markets. Microsoft's numbers weren't as strong as Intel's (Nasdaq: INTC) were last week, as piracy and a slowing PC market are bigger headwinds for Microsoft. However, its online gaming business looks better than Sony's (NYSE: SNE) does currently.

Shell Delivers Royal Quarter

Europe's largest oil company Royal Dutch Shell plc (NYSE: RDS.A) reported better-than-expected first quarter 2011 results, thanks to higher oil prices, better refining margins and the group's robust operating performance.

Earnings per ADR (on a current cost of supplies basis), excluding one-time items and gains or losses from inventories, came in at $2.04, significantly ahead of the year-ago result of $1.57 and also exceeded the Zacks Consensus Estimate of $1.86. Revenues were up 27.7% to $109.9 billion.

Outlook & Recommendation

Royal Dutch Shell ADRs currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. Longer-term, we are maintaining our Neutral recommendation on the stock.

With the economic rebound showing signs of strengthening and oil prices rallying, we expect integrated oil companies such as Royal Dutch Shell to continue to accelerate revenue and earnings growth over the next few quarters. Apart from the economic recovery, the group's recent results have also benefited from its operational and production efficiency and contributions from growth programs.

The Hague-based group has been able to boost returns and remain competitive by embarking on aggressive cost reduction initiatives, exiting unprofitable markets and streamlining the organization.

However, at current valuations, we have a difficult time justifying sufficient potential return to support an Outperform rating. We expect Royal Dutch Shell's returns to remain below average, as the group makes significant investments in large growth projects. Consequently, we see the stock performing in line with the broader market.

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