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Microsoft (MSFT) Gains But Lags Market: What You Should Know

Zacks Equity Research

Microsoft (MSFT) closed at $185.36 in the latest trading session, marking a +0.24% move from the prior day. This change lagged the S&P 500's 1.37% gain on the day. Elsewhere, the Dow gained 2.05%, while the tech-heavy Nasdaq added 0.78%.

MSFT will be looking to display strength as it nears its next earnings release. In that report, analysts expect MSFT to post earnings of $1.40 per share. This would mark year-over-year growth of 2.19%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $36.62 billion, up 8.61% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.69 per share and revenue of $141.51 billion, which would represent changes of +19.79% and +12.45%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for MSFT. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.09% higher. MSFT currently has a Zacks Rank of #3 (Hold).

Investors should also note MSFT's current valuation metrics, including its Forward P/E ratio of 32.49. For comparison, its industry has an average Forward P/E of 32.48, which means MSFT is trading at a premium to the group.

We can also see that MSFT currently has a PEG ratio of 2.51. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Computer - Software stocks are, on average, holding a PEG ratio of 2.51 based on yesterday's closing prices.

The Computer - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 87, putting it in the top 35% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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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