Red Hat Earnings: Investors Love These Results

Rising costs hurt S&P 500 (NYSE:SPY) component Red Hat Inc. (NYSE:RHT) in the third quarter as profit dropped from a year earlier. Red Hat is engaged in providing open source software solutions. They are known for their version of Linux, Red Hat Enterprise Linux.

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Red Hat Inc. Earnings Cheat Sheet

Results: Net income for Red Hat Inc. fell to $34.8 million (18 cents per share) vs. $38.2 million (19 cents per share) a year earlier. This is a decline of 9.1% from the year-earlier quarter.

Revenue: Rose 18.5% to $343.6 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Red Hat Inc. reported adjusted net income of 29 cents per share. By that measure, the company beat the mean estimate of 20 cents per share. It beat the average revenue estimate of $310.8 million.

Quoting Management: “Strong execution, industry leading solutions and our ability to deliver a compelling ROI to our customers, all contributed to continued momentum and strong third quarter revenue growth in the face of a challenging global economic environment. Red Hat is benefiting from our position as a trusted vendor for IT,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. “Since October of last year we have completed three acquisitions, and are announcing a fourth today to expand our portfolio of open source solutions and enlarge our addressable market. As our enterprise customers move to open, hybrid cloud architectures, we are addressing their needs with a clear roadmap based on industry-leading open source technologies.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 19.3%, with the biggest boost coming in the third quarter of the last fiscal year when revenue rose 23.1% from the year earlier quarter.

The company’s net income has fallen in each of the last two quarters. In the second quarter, net income fell 12.4% from the year-earlier quarter.

The company topped expectations last quarter after falling short of forecasts in the second quarter with net income of 20 cents versus a mean estimate of net income of 21 cents per share.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the fourth quarter is 21 cents per share, down from 23 cents ninety days ago. The average estimate for the fiscal year is 83 cents per share, down from 87 cents ninety days ago.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)