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Microsoft (MSFT) Dips More Than Broader Markets: What You Should Know

Microsoft (MSFT) closed at $254.69 in the latest trading session, marking a -0.18% move from the prior day. This move lagged the S&P 500's daily loss of 0.09%. Meanwhile, the Dow lost 0.56%, and the Nasdaq, a tech-heavy index, added 0.22%.

Heading into today, shares of the software maker had gained 15.92% over the past month, outpacing the Computer and Technology sector's gain of 7.08% and the S&P 500's gain of 5.55% in that time.

Investors will be hoping for strength from Microsoft as it approaches its next earnings release. In that report, analysts expect Microsoft to post earnings of $2.28 per share. This would mark a year-over-year decline of 8.06%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $52.93 billion, up 2.32% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $9.54 per share and revenue of $212.38 billion, which would represent changes of +3.58% and +7.12%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for Microsoft. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.04% lower. Microsoft is currently a Zacks Rank #4 (Sell).

Investors should also note Microsoft's current valuation metrics, including its Forward P/E ratio of 26.74. This represents a premium compared to its industry's average Forward P/E of 26.04.

Also, we should mention that MSFT has a PEG ratio of 2.48. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Computer - Software was holding an average PEG ratio of 2.17 at yesterday's closing price.

The Computer - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 93, which puts it in the top 37% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.

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