Red Hat Inc. (
hit a 52-week high of $58.71 on Friday, Dec 20, 2013. The bullish
run reflects Red Hat's better-than-expected third-quarter results
and an optimistic guidance.
The closing price of Red Hat on Dec 20 was $56.10, representing a
modest one-year return of about 3.9% and a year-to-date return of
about 2.8%. The S&P 500 jumped 27.5% and 24.3%, respectively,
during the same period.
Red Hat delivered a positive average earnings surprise of 15.6%
over the past four quarters. This Zacks Rank #2 (Buy) stock has a
market cap of $10.63 billion and a long-term expected earnings
growth rate of 19.0%.
Impressive Third Quarter
Red Hat beat the Zacks Consensus Estimate on both lines in the
third quarter of fiscal 2014. Earnings jumped 44.8% from the
year-ago quarter to 42 cents per share.
Revenues increased 15.4% year over year to $396.5 million and
were ahead of management's guided range of $381.0 million to
$384.0 million. The strong year-over-year growth in revenues was
primarily driven by a 16.0% increase in subscription revenues and
a 12.3% increase in revenues from training and services.
For the fourth quarter of fiscal 2014, Red Hat expects revenues
in the range of $397.0 million to $400.0 million. Management
expects operating margin to be around 24.5%. Non-GAAP earnings
are expected to be in the range of 36 cents to 38 cents per share
for the upcoming quarter.
Key Growth Catalysts
We believe that strong billings growth (up 19.0% year over year),
solid product pipeline, continuing investments to expand product
portfolio and partnerships with the likes of
International Business Machines (
, Dell and
will drive growth, going forward.
Moreover, Red Hat continues to gain market share. We believe that
the company has significant growth potential in the public cloud
segment over the long term.
The Zacks Consensus Estimate for the fourth quarter increased a
penny to 25 cents over the last 30 days. However, for fiscal 2014
and 2015, the earnings estimate remained steady at 96 cents and
$1.13, respectively, over the same time frame.
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