Why Microsoft (MSFT) Outpaced the Stock Market Today

Microsoft (MSFT) ended the recent trading session at $427.58, demonstrating a +1% swing from the preceding day’s closing price. The stock’s change was more than the S&P 500’s daily gain of 0.55%. Elsewhere, the Dow lost 0.06%, while the tech-heavy Nasdaq added 1.24%.

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Market participants will be closely following the financial results of Microsoft in its upcoming release. In that report, analysts expect Microsoft to post earnings of $3.14 per share. This would mark year-over-year growth of 7.17%. Simultaneously, our latest consensus estimate expects the revenue to be $68.75 billion, showing a 10.86% escalation compared to the year-ago quarter.

For the entire fiscal year, the Zacks Consensus Estimates are projecting earnings of $12.93 per share and a revenue of $277.69 billion, representing changes of +9.58% and +13.29%, respectively, from the prior year.

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Investors should also take note of any recent adjustments to analyst estimates for Microsoft. These revisions typically reflect the latest short-term business trends, which can change frequently. Therefore, positive revisions in estimates convey analysts’ confidence in the company’s business performance and profit potential.

Our research reveals that these estimate alterations are directly linked with the stock price performance in the near future. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system.

The Zacks Rank system, which varies between #1 (Strong Buy) and #5 (Strong Sell), carries an impressive track record of exceeding expectations, confirmed by external audits, with stocks at #1 delivering an average annual return of +25% since 1988. Over the past month, there’s been no change in the Zacks Consensus EPS estimate. At present, Microsoft boasts a Zacks Rank of #3 (Hold).

In terms of valuation, Microsoft is currently trading at a Forward P/E ratio of 32.74. This represents a premium compared to its industry’s average Forward P/E of 32.71.

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Also, we should mention that MSFT has a PEG ratio of 2.25. The PEG ratio is akin to the commonly utilized P/E ratio, but this measure also incorporates the company’s anticipated earnings growth rate. As of the close of trade yesterday, the Computer – Software industry held an average PEG ratio of 3.24.

The Computer – Software industry is part of the Computer and Technology sector. This industry, currently bearing a Zacks Industry Rank of 91, finds itself in the top 37% echelons of all 250+ industries.

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