Thursday, March 10, 2011

Red Hat, Inc. (NYSE: RHT): Q4 Earnings Preview

Red Hat, Inc. (NYSE: RHT) is scheduled to release its fourth-quarter earnings after the closing bell on Wednesday, March 23, 2011. Analysts, on average, expect the company to report earnings of 22 cents per share on revenue of $235.98 million. In the year ago quarter, the company reported earnings of 19 cents per share on revenue of $195.87 million.

Red Hat, Inc., together with its subsidiaries, provides open source software solutions to enterprises worldwide. The Company employs an open source software development and licensing model that uses the collaborative input of an international community of contributors to develop and enhance software.

In the preceding fiscal second-quarter, the Raleigh, North Carolina based company's net income was $26.02 million or $0.13 per share, compared to $16.41 million or $0.08 per share in the previous year. On an adjusted basis, net income for the quarter was $39.06 million or $0.20 per share, up from $33.52 million or $0.17 per share a year ago. Revenue rose 21% to $235.58 million from $194.35 million last year. Analysts, on average, expected the company to report earnings of $0.20 per share on revenue of $227.27 million.

At its last earnings call in December, the company raised its fiscal 2011 revenue guidance range to $898.0 million to $900.0 million versus its previous expectation of $877.0 million to $885.0 million. Non-GAAP EPS is expected to be in the range of 78 cents to 79 cents versus previous its expectation of 76 cents to 77 cents. Red Hat continues to expect operating cash flow for the fiscal year to range between $280.0 million and $290.0 million.

For the fourth quarter of 2011, Red Hat expects revenues in the range of $234.0 million to $236.0 million and non-GAAP EPS is projected in the range of 21 cents to 22 cents. 

Red Hat remains focused on managing discretionary costs effectively while increasing investments simultaneously in growth areas such as middleware, virtualization and cloud computing. 

Recently, JP Morgan analyst John Difucci lowered his rating on the stock to Underperform from Neutral, citing valuation. In a research note to clients, Difucci wrote “We believe it is risky to assume Red Hat will become a meaningful player in server virtualization at this time.” 

Full Disclosure: None.
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