Why Microsoft and Visa Will Move the Dow Tomorrow

The heaviest week of Dow earnings concludes with these two stocks reporting results this afternoon. Find out what investors expect to see.

Dan Caplinger
Dan Caplinger
Apr 24, 2014 at 12:30PM

After a brief pause, the Dow Jones Industrials (DJINDICES:^DJI) resumed their upward trajectory Thursday morning, rising 17 points by 12:30 p.m. EDT as the stock market continued to see favorable earnings results from a number of high-profile companies. This afternoon, Dow components Microsoft (NASDAQ:MSFT) and Visa (NYSE:V) take center stage with their own first-quarter reports and give their read on the technology and consumer-finance sectors.

Both Microsoft and Visa will report results after the market closes, with Microsoft typically making its results available just minutes after 4 p.m. EDT. The Windows maker's conference call is scheduled to begin at 5:30 p.m. EDT. Visa reported its results last quarter before the market's open, so it's unclear whether the payment processor will release its earnings right after the market closes or wait until closer to its scheduled 5 p.m. EDT conference call. 

Microsoft CEO Satya Nadella. Source: Wikimedia Commons.

Microsoft is expected to see earnings and revenue fall from year-ago levels, but investors have been increasingly optimistic about its long-range future. That's largely because of the arrival of new CEO Satya Nadella, who wasted little time in grabbing the reins at Microsoft and imposing his own strategic vision on the tech giant. For now, Nadella is making the most of his honeymoon period, with investors largely satisfied to see Microsoft taking definitive action in pursuing priorities such as cloud computing and mobile. Eventually, Nadella will have to prove that his direction was the right one, but today's earnings report is important more for the opportunity for the CEO to reveal additional details of his long-term plan than in looking at actual financial results.

Source: Motley Fool.

Visa investors, on the other hand, want to see substantial revenue and earnings growth, as the card-network giant should be able to take advantage of improving economic conditions to collect its cut of rising transaction volume. Concerns about payment security have been at the forefront of investors' minds lately, with the outbreak of the Heartbreak virus and recent card breaches at prominent retailers. Yet Visa still has a strong opportunity worldwide to ramp up penetration of the global payments market. Visa will have to fend off competition from other card networks, as well as up-and-coming tech players seeking to disrupt the payments industry, and it also has ongoing legal issues that will distract it from its core mission. Yet if emerging markets continue evolving toward electronic payment systems, Visa wants to be there to capitalize.

For Dow investors, Visa's share price is five times that of Microsoft, and so Visa has the greater potential to move the index. Yet the influence that the tech giant wields could leave investors even more impressed if Microsoft announces unexpectedly positive news in Nadella's first earnings report as CEO.