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Will Red Hat Beat Earnings in 1Q?

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Red Hat Inc. is set to report its first-quarter 2014 results on Jun 19. In the previous quarter, the company’s earnings of 25 cents beat the Zacks Consensus Estimate by 19.05%. Let’s see how things are shaping up for the company in this quarter.

Growth Factors this past Quarter

Red Hat reported 17.1% year-over-year growth in revenues aided by higher subscription, and training and services revenues. The company’s deal wins continue as Red Hat secured 30 deals worth over $1.0 million, including six deals in excess of $5.0 million and three deals were over $10.0 million.

For the first quarter of 2014, Red Hat expects revenues in the range of $358.0 million to $361.0 million. Earnings on a non-GAAP basis are projected in the range of 30 cents to 31 cents per share.

Earnings Whispers?

The Zacks Consensus Estimate for the first quarter stands at 22 cents per share while that for fiscal 2014 is pegged at 94 cents per share.

There have been no revisions to the first quarter and 2014 estimates over the last 30 days. As a result, the Zacks Consensus Estimate for the two periods has not moved in any direction.

The lack of downward movement in estimates signals that the first quarter might be a good one. Moreover, the stock carries a Zacks Rank #2 (Buy).

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Our model states that a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, #2 or #3 to beat the earnings estimates. However, you could consider the following stocks that satisfy both criteria:

Akamai Technologies Inc. (AKAM - Free Report) has a Zacks Rank #1 (Strong Buy) and Zacks Earnings ESP of +8.11%.

Accenture plc (ACN - Free Report) has a Zacks Rank #2 (Buy) and Zacks Earnings ESP of +3.51%.

Yahoo Inc. has a Zacks Rank #2 (Buy) and Zacks Earnings ESP of +3.85%.

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