Can a Greener Microsoft Keep Up the Pace?

Microsoft Corp. (NASDAQ: MSFT) is scheduled to release its most recent quarterly report after the markets close on Wednesday. The consensus estimates are calling for $1.32 in earnings per share (EPS) and $35.67 billion in revenue. The fiscal second quarter of last year reportedly had $1.10 in EPS and $32.47 billion in revenue.

Environmental, sustainability and governance (ESG) in corporate America is a rapidly growing theme, and Microsoft is jumping on the bandwagon. Earlier this month, the tech giant announced a new plan to reduce its carbon footprint, ultimately to zero.

The company’s goal is to be carbon negative by 2030, and the company’s longer-term goal (2050) is to have removed all the carbon from the environment that the company has emitted (either directly or by electrical consumption) since it was founded in 1975.

Microsoft is not just targeting lowering its carbon emissions over the next decade. The company is targeting its direct emissions, as well as emissions for the company’s entire supply and value chain. This includes a new initiative to use Microsoft technology to help the company’s suppliers and customers shrink their own carbon footprints.

It is also launching a new $1 billion climate innovation fund, with a target to “accelerate the global development of carbon reduction, capture and removal technologies.” As for its supply chain, the company pledged to make carbon reduction an explicit aspect of its procurement processes for its supply chain.

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Excluding Wednesday’s move, Microsoft stock had outperformed the broad markets with a gain of about 57% in the past 52 weeks. In just the past quarter alone, the stock was up more than 17%.

Here’s what analysts had to say going into the report:

• RBC Capital Markets reiterated its Outperform rating and raised its target to $180 from $165 on January 21.
• Wells Fargo reiterated a Buy rating on January 14.
• Credit Suisse reiterated an Outperform rating and raised its target to $180 from $155 on January 13.
• Jefferies reiterated a Buy rating and raised its target price to $185 from $160 on January 9.
• Cowen reiterated an Outperform rating and raised its price target from $165 to $180 on January 9.
• Wedbush also reiterated it as Outperform on January 9, but it raised its target to $195 from $185.
• Morgan Stanley reiterated an Overweight rating and raised its target to $189 from $157 on January 8.
• DZ Bank reiterated a Buy rating on January 6.

Shares of Microsoft traded up about 1% to $167.19 on Wednesday, in a 52-week range of $102.35 to $168.19. The consensus price target is $174.56.

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