The company acquired nokias devices and services

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service, in October 2011. The company acquired Nokia’s Devices and Services Business in April 2014. About 47% of revenue is generated outside the U.S. VALUATION Microsoft shares have risen 47% in the last year on a total-return basis, compared to a 23% increase for the S&P 500 and a 37% increase in the S&P Information Technology Sector Index. With a trailing enterprise value/EBITDA multiple of 16.1, MSFT trades near the peer median and above the high end of its five-year historical average range of 9.9-11.9. Microsoft’s forward enterprise value/EBITDA multiple of 14.0 is 11% below the peer average, less than the average discount of 21% over the past two years. We are maintaining our BUY rating on Microsoft with a revised target price of $107. On February 5, BUY-rated MSFT closed at $88.00, down $3.78. (Joseph Bonner, CFA, 2/5/18)
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M ARKET D IGEST - 11 - PARKER-HANNIFIN CORP. (NYSE: PH, $182.00) ................................................................. BUY PH: Recent weakness offers buying opportunity * PH shares have underperformed the market over the past quarter, with a flat performance versus an increase of 4.0% for the S&P 500. * On February 1, the company reported fiscal 2Q18 EPS that topped analyst expectations and raised its full-year guidance. * Based on our expectations for margin improvement and growth in new orders, we are once again boosting our EPS estimates for FY18 and FY19. * The shares have moved higher over the past year, but we see the potential for further strong performance. ANALYSIS INVESTMENT THESIS Our rating on Parker-Hannifin Corp. (NYSE: PH) is BUY. In our view, the company is on track to achieve its long-term goals of raising margins and growing earnings. Over time, we expect it to generate high single-digit EPS growth, driven by 2%- 4% revenue growth, margin improvement, and share buybacks. Near-term trends, which had been a problem, appear to have turned a corner, and we see better revenue and earnings growth ahead. We also have a favorable view of the 2017 acquisition of filtration company CLARCOR. The shares have moved higher over the past year, but we see the potential for further strong performance. Our 12-month target price is $210. RECENT DEVELOPMENTS PH shares have underperformed the market over the past quarter, with a flat performance versus an increase of 4.0% for the S&P 500. The shares have also underperformed the average industrial stock, as the Industrial ETF IYJ has risen 4.6% in the past quarter. The shares have outperformed over the past year with a gain of 24%, versus an 18% advance for the market and a 20.6% gain for the sector. The stock’s long-term performance record, over multiple market cycles, is solid as well. The beta on PH shares is 1.25. On February 1, PH reported fiscal second-quarter earnings that easily topped the consensus estimate. Adjusted EPS rose 13% to $2.15, and beat the consensus by $0.08. Revenue rose a solid 10% on an organic basis (26% including acquisitions) to $3.4 billion. The overall segment operating margin increased 20 basis points to 14.9%. For the first half, the company has earned $4.39 per share.
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