Back to top

Analyst Blog

Shares of Red Hat Inc. (RHT - Snapshot Report) 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 (IBM - Analyst Report), Google , Dell and Intel (INTC - Analyst Report) 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.

Estimate Revision

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.

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%