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

Zacks Equity Research

In the latest trading session, Microsoft (MSFT) closed at $132.85, marking a +0.3% move from the previous day. This move outpaced the S&P 500's daily gain of 0.09%. At the same time, the Dow added 0.09%, and the tech-heavy Nasdaq gained 0.62%.

Heading into today, shares of the software maker had gained 2.73% over the past month, outpacing the Computer and Technology sector's gain of 0.35% and the S&P 500's gain of 2.08% in that time.

Investors will be hoping for strength from MSFT as it approaches its next earnings release. The company is expected to report EPS of $1.21, up 7.08% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $32.72 billion, up 8.76% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $4.58 per share and revenue of $124.84 billion, which would represent changes of +18.04% and +13.12%, respectively, from the prior year.

Any recent changes to analyst estimates for MSFT should also be noted by investors. 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.

Our research shows that these estimate changes are directly correlated with near-term stock prices. 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.

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 remained stagnant. MSFT is currently a Zacks Rank #2 (Buy).

Valuation is also important, so investors should note that MSFT has a Forward P/E ratio of 28.89 right now. This represents a discount compared to its industry's average Forward P/E of 29.74.

Also, we should mention that MSFT has a PEG ratio of 2.33. 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. The Computer - Software was holding an average PEG ratio of 2.14 at yesterday's closing price.

The Computer - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 151, putting it in the bottom 42% 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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