Red Hat Inc.
(
RHT
) is set to release its fourth quarter 2012 results on Wednesday,
March 28, 2012. In the run up to the earnings results, we do not
notice any substantial movement in analysts' estimates for the
quarter.
Highlights from the Prior Quarter
Both top line and bottom line of Red Hat surpassed the Zacks
Consensus Estimates in the third quarter, driven by higher demand
for cloud computing technologies, as customers increasingly
upgraded their datacenters to facilitate the adoption of cloud
computing. Moreover, the company witnessed solid double-digits
growth across all the regions during the reported quarter.
For further details please refer to:
Red Hat Beats by a Penny
Expectations from the Current Quarter
For fourth quarter 2012, Red Hat expects revenues in the range
of $289.0 million to $292.0 million. The Zacks Consensus Estimate
is pegged at $291.0 million. The non-GAAP EPS is projected in the
range of 26 cents to 27 cents, significantly higher than the Zacks
Consensus Estimate of 20 cents. Operating margin is expected to be
around 25.5% and tax rate is projected at 31.0%.
Red Hat expects fiscal 2012 non-GAAP EPS (excluding stock-based
compensation) to range from $1.07 to $1.08. The Zacks Consensus
Estimate for fiscal 2012 is pegged at 81 cents. Moreover, Red Hat
expects operating cash flow to be $370.0 million - $375.0
million.
Estimates Revision Trend
Over the past 30 days, none of the 11 analysts covering the
stock revised their estimates for the quarter. Thus, the Zacks
Consensus Estimate for the fourth quarter was pinned at 20 cents
per share.
Likewise, for fiscal 2012, none of the 12 analysts covering the
stock revised their estimates over the last 30 days. The Zacks
Consensus Estimate remained at 81 cents.
Analysts expect Red Hat to exceed estimates on the back of large
deal signings and robust billing revenue. Moreover, strong demand
for RHEL 6 and JBoss is expected to drive the top line for the
quarter. Additionally, the company's offerings in the cloud
computing market coupled with server virtualizations and middleware
section is expected to be incrementally beneficial in the long
run.
Our Take
Red Hat has consistently exceeded estimates in the four
preceding quarters. The average surprise in these quarters is a
positive 14.39%, and for the current quarter we expect the company
to beat the Zacks Consensus by the same magnitude.
Red Hat is emerging as a significant cloud-computing provider.
The company's CloudForms, an Infrastructure-as-a-Service offering,
and Openshift, a Platform-as-a-Service offering will likely
position Red Hat as a premier vendor of cloud technologies going
forward.
Red Hat boasts an impressive product line up and expects to
invest heavily for developing innovative products.
However, Red Hat faces competition from
Microsoft Corp
(
MSFT
) and
Oracle Corp
(
ORCL
), which could be a headwind going forward. The company's
increasing investment in the business will also challenge near-term
earnings.
We maintain our Neutral recommendation over the long term (6-12
months). Currently, Red Hat has a Zacks #3 Rank, which implies a
'Hold' rating in the short-term.
MICROSOFT CORP (
MSFT
): Free Stock Analysis Report
ORACLE CORP (
ORCL
): Free Stock Analysis Report
RED HAT INC (
RHT
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research