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Microsoft (MSFT) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
·3 mins read

In the latest trading session, Microsoft (MSFT) closed at $203.19, marking a +1.3% move from the previous day. This move outpaced the S&P 500's daily gain of 0.3%. At the same time, the Dow added 0.2%, and the tech-heavy Nasdaq gained 0.37%.

Heading into today, shares of the software maker had lost 9.3% over the past month, lagging the Computer and Technology sector's loss of 5.52% and the S&P 500's loss of 5.02% in that time.

Investors will be hoping for strength from MSFT as it approaches its next earnings release. In that report, analysts expect MSFT to post earnings of $1.53 per share. This would mark year-over-year growth of 10.87%. Meanwhile, our latest consensus estimate is calling for revenue of $35.68 billion, up 7.93% from the prior-year quarter.

MSFT's full-year Zacks Consensus Estimates are calling for earnings of $6.39 per share and revenue of $155.26 billion. These results would represent year-over-year changes of +10.94% and +8.56%, respectively.

Any recent changes to analyst estimates for MSFT should also be noted by investors. Recent revisions tend to reflect the latest 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. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.01% higher. MSFT currently has a Zacks Rank of #3 (Hold).

In terms of valuation, MSFT is currently trading at a Forward P/E ratio of 31.39. This valuation marks a discount compared to its industry's average Forward P/E of 31.93.

Investors should also note that MSFT has a PEG ratio of 2.29 right now. 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. Computer - Software stocks are, on average, holding a PEG ratio of 2.53 based on yesterday's closing prices.

The Computer - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 53, which puts it in the top 21% 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.

To follow MSFT in the coming trading sessions, be sure to utilize Zacks.com.

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