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

Zacks

In the latest trading session, Microsoft (MSFT) closed at $112.09, marking a +1.08% move from the previous day. This move lagged the S&P 500′s daily gain of 1.09%. Elsewhere, the Dow gained 1.13%, while the tech-heavy Nasdaq added 1.51%.

Prior to today’s trading, shares of the software maker had gained 4.69% over the past month. This has outpaced the Computer and Technology sector’s loss of 0.28% and the S&P 500′s gain of 1.92% in that time.

Wall Street will be looking for positivity from MSFT as it approaches its next earnings report date. This is expected to be January 30, 2019. On that day, MSFT is projected to report earnings of $1.09 per share, which would represent year-over-year growth of 13.54%. Our most recent consensus estimate is calling for quarterly revenue of $32.46 billion, up 12.24% from the year-ago period.

MSFT’s full-year Zacks Consensus Estimates are calling for earnings of $4.43 per share and revenue of $124.08 billion. These results would represent year-over-year changes of +14.18% and +12.43%, respectively.


Investors should also note any recent changes to analyst estimates for MSFT. These revisions typically reflect the latest short-term business trends, which can change frequently. 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. 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. Within the past 30 days, our consensus EPS projection has moved 0.38% higher. MSFT is currently sporting a Zacks Rank of #2 (Buy).

Investors should also note MSFT’s current valuation metrics, including its Forward P/E ratio of 25.05. Its industry sports an average Forward P/E of 31.06, so we one might conclude that MSFT is trading at a discount comparatively.

It is also worth noting that MSFT currently has a PEG ratio of 2.01. 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 36% 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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