Red Hat Third Quarter Earnings Sneak Peek

S&P 500 (NYSE:SPY) component Red Hat, Inc. (NYSE:RHT) will unveil its latest earnings on Thursday, December 20, 2012. Red Hat is engaged in providing open source software solutions. They are known for their version of Linux, Red Hat Enterprise Linux.

Red Hat, Inc. Earnings Preview Cheat Sheet

Wall St. Earnings Expectations: The average estimate of analysts is for profit of 20 cents per share, a decline of 4.8% from the company’s actual earnings for the same quarter a year ago. During the past three months, the average estimate has moved down from 22 cents. Between one and three months ago, the average estimate moved down. It has been unchanged at 20 cents during the last month. Analysts are projecting profit to rise by 18.6% versus last year to 83 cents.

Past Earnings Performance: The company fell short of estimates last quarter after topping forecasts the quarter prior. In the second quarter, it reported net income of 20 cents per share against a mean estimate of 21 cents. Two quarters ago, it beat expectations by one cent with profit of 20 cents.

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Wall St. Revenue Expectations: Analysts predict a rise of 16.6% in revenue from the year-earlier quarter to $338.1 million.

A Look Back: In the second quarter, profit fell 12.4% to $35 million (18 cents a share) from $40 million (20 cents a share) the year earlier, missing analyst expectations. Revenue rose 14.7% to $322.6 million from $281.3 million.

Stock Price Performance: Between September 20, 2012 and December 14, 2012, the stock price fell $6.67 (-11.7%), from $56.84 to $50.17. It saw one of its worst periods between October 4, 2012 and October 12, 2012 when shares fell for seven straight days, dropping 3.8% (-$2.11) over that span. The stock price saw one of its best stretches over the last year between December 5, 2012 and December 11, 2012, when shares rose for five straight days, increasing 4.9% (+$2.39) over that span.

Key Stats:

With double-digit revenue growth the past four quarters, this earnings release is a chance to keep that positive trend going. The company has averaged year-over-year revenue growth of 19.5% over the last four quarters.

After last quarter’s profit drop broke a string of income increases, this earnings announcement is definitely a chance for a rebound. Net income rose 47% in the third quarter of the last fiscal year, 7.3% in the fourth quarter of the last fiscal year and 15.4% in the first quarter before declining in the second quarter.

Analyst Ratings: With 17 analysts rating the stock a buy, none rating it a sell and eight rating the stock a hold, there are indications of a bullish stance by analysts.

Balance Sheet Analysis: The company’s current ratio of assets to liabilities came in at 1.47 last quarter. The current ratio is an indication of a firm’s liquidity and ability to meet creditor demands and generally, for every dollar the company owes in the short term, it has that figure available in assets that can be converted to cash in the short term. The company improved this liquidity measure from 1.45 in the first quarter to the last quarter driven in part by an increase in current assets. Current assets increased 6% to $1.24 billion while liabilities rose by 4.6% to $844.6 million.

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