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

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In the latest trading session, Microsoft (MSFT - Free Report) closed at $157.70, marking a +0.07% move from the previous day. This change lagged the S&P 500's 0.3% gain on the day. Meanwhile, the Dow gained 0.27%, and the Nasdaq, a tech-heavy index, added 0.3%.

Prior to today's trading, shares of the software maker had gained 5.38% over the past month. This has outpaced the Computer and Technology sector's gain of 3.51% and the S&P 500's gain of 2.69% in that time.

Wall Street will be looking for positivity from MSFT as it approaches its next earnings report date. The company is expected to report EPS of $1.25, up 13.64% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $35.69 billion, up 9.92% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.35 per share and revenue of $140.11 billion, which would represent changes of +12.63% and +11.34%, 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. As a result, we can interpret positive estimate revisions as a good sign for 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 has moved 0.01% lower. MSFT currently has a Zacks Rank of #4 (Sell).

Investors should also note MSFT's current valuation metrics, including its Forward P/E ratio of 29.45. Its industry sports an average Forward P/E of 31.91, so we one might conclude that MSFT is trading at a discount comparatively.

Investors should also note that MSFT has a PEG ratio of 2.47 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. The Computer - Software was holding an average PEG ratio of 2.32 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 152, putting it in the bottom 41% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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