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Red Hat (RHT) Hits 52-Week High on Impressive Q4 Results

Share price of Red Hat Inc.RHT rallied to a new 52-week high of $87.91, eventually closing a tad lower at $86.48 on Mar 28. On a year-to-date basis, shares of Red Hat have returned 24.1%, compared with the Zacks Computer-Software industry's gain of 10.2%.

Currently, Red Hat has a Zacks Rank #3 (Hold). You can see

the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Notably, the stock has a market cap of $15.42 billion.

Key Factors

One of the leading developers and providers of open source software and services, Red Hat has been a consistent performer in recent times. Notably, Red Hat has surpassed the Zacks Consensus Estimate by an average of 8.24% in the last four quarters.

On Mar 27, 2017 the company reported better-than-expected fourth-quarter fiscal 2017 results. On a year-over-year basis, adjusted earnings (excluding stock-base compensation) increased 17.3% year over year to 61 cents per share while revenues increased 15.7% year over year to $629 million, primarily driven by strong subscription revenues and cross-selling of cloud-enabled technology. In the fourth quarter, subscription revenues grew 16.7% year over year to $559.6 million. Additionally, Training & services revenues increased 8.4% from the year-ago quarter to $69.3 million.

Red Hat, Inc. Price and Consensus

Red Hat, Inc. Price and Consensus | Red Hat, Inc. Quote

Moreover, Red Hat entered into 30 big deals in the fourth quarter valued at $1 million or more. Management noted that 16 deals were worth greater than $5 million. Out of these deals, four were worth more than $20 million.

Red Hat's emerging technologies continued to gain momentum. Approximately one-third of the biggest deals contained an OpenStack private cloud component, approximately one-third had an OpenShift container platform component and more than a third of the deals contained Ansible, the company's automation management technology.

OpenStack collaborations continue to expand and now include the likes of HP and Huawei. The company recently inked an expanded cloud computing partnership with International Business Machines (IBM) to sell Red Hat's distribution of OpenStack as a private cloud offering to their customers.

Additionally, during the quarter, Red Hat won several deals in the telecommunications vertical including a $100 million contract from a global service provider. Financial services was the second largest vertical in the quarter.

The growing popularity of emerging technologies such as cloud and mobile, and the move to cloud-native application development are the factors driving the growth of Red Hat.

Moreover, the Red Hat Application Platform Partner Initiative, piloted by a select group of consulting partners from North America, aims to club together organizations that are passionate about digital transformation and open source software.

Red Hat recently authorized more than 20 North American resellers to sell its software-defined storage solutions, Red Hat Ceph Storage and Red Hat Gluster Storage. It already has technical alliances with Intel Corporation INTC , Cisco Systems, Inc. CSCO , Seagate Technology PLC STX and others.

Red Hat is benefiting from strong deal wins, improving recurring revenues and the cross-selling of its cloud-based technology. The company has a strong customer as well as partner base including the likes of IBM, Intel, Dell Technologies, Google cloud platform and Microsoft's Azure. All these should drive future growth.

For the first quarter, Red Hat projects revenues of $643 - $650 million. Non-GAAP earnings are expected to be in the range of 52 to 53 cents per share.

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2018 moved down to $1.74 from $1.75 over the last 60 days. However, for fiscal 2019, estimates increased 1.4% over the same time frame to $2.17.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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