What Lies Ahead For Microsoft ETFs This Earnings Season?


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Microsoft (MSFT - Free Report) is set to release fiscal second-quarter 2020 results on Jan 29 after the market close. Being the world's largest software maker, it is worth taking a look at the company’s fundamentals ahead of its results.

The stock has gained 12.5% over the past three months but slightly underperformed the industry, which was up 12.8% in the said time frame. The underperformance could reverse if the software leader beat estimates.

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Inside Our Methodology

Microsoft has a Zacks Rank #3 (Hold) and an Earnings ESP of -0.70%. According to our surprise prediction methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The stock has seen no earnings estimate revision for the fiscal second quarter over the past 60 days. The Zacks Consensus Estimate indicates substantial earnings growth of 20% from the year-ago quarter. Microsoft projects substantial year-over-year revenue growth of 9.92%. Its earnings track is impressive, with the last four-quarter positive earnings surprise being 9.64%, on average. The stock boasts a solid Growth Score of B and belongs to a top-ranked Zacks industry (top 20%).

The Zacks Consensus Estimate for average target price is $172.67 with nearly 96% of the analysts having a Strong Buy or a Buy rating ahead of earnings. This represents nearly 6.4% upside from the current price.

What to Watch?

Investors’ focus will be on the cloud-computing business, which is witnessing a slowdown. Azure sales grew 59% in the fiscal first quarter, down from 64% growth in the fiscal 2019 fourth quarter.

ETFs in Focus

Given this, ETFs having the highest allocation to this tech giant will be in focus. These funds could be potential movers if Microsoft surprises the market:

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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