Microsoft (MSFT) Gains But Lags Market: What You Should Know - January 6, 2020


In the latest trading session, Microsoft (MSFT Free Report) closed at $159.03, marking a +0.26% move from the previous day. This change lagged the S&P 500’s 0.35% gain on the day. At the same time, the Dow added 0.24%, and the tech-heavy Nasdaq gained 0.56%.

Prior to today’s trading, shares of the software maker had gained 5.8% over the past month. This has lagged the Computer and Technology sector’s gain of 6.72% and outpaced the S&P 500’s gain of 4.69% 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 $1.32, up 20% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $35.69 billion, up 9.92% from the year-ago period.

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.

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. 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. 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 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. Within the past 30 days, our consensus EPS projection has moved 0.01% lower. MSFT currently has a Zacks Rank of #4 (Sell).

In terms of valuation, MSFT is currently trading at a Forward P/E ratio of 29.64. This represents a discount compared to its industry’s average Forward P/E of 32.81.

Investors should also note that MSFT has a PEG ratio of 2.49 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company’s expected earnings growth rate into account. The Computer – Software industry currently had an average PEG ratio of 2.15 as of yesterday’s close.

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

The Zacks Industry Rank gauges the strength of our 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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