Red Hat (RHT) Rockets on Third Quarter Earnings

Shares of Red Hat Inc. (RHT) were trading up +6.50 or +10.57 percent to $68.00 per share in this morning's premarket, after the company beat analyst estimates for their third quarter earnings results. The company released their results after yesterday's close and upwardly revised its full year profit forecast. Red Hat stock closed at $61.50 per share, up +2.02 or +3.40 percent in Thursday's regular trading session.

Raleigh, North Carolina based Red Hat Inc. was founded in 1993 and is one of the foremost providers of open source software products.
The company provides the enterprise community with open source solutions including its Red Hat Enterprise Linux, as well as consulting services, management applications, operating system platforms, middleware applications and support and training.

Red Hat reported net income of $48 million or $0.26 per share for the third quarter. On a non-GAAP basis, earnings came to $0.42 per share on revenue of $456 million. Analysts were expecting the company to report earnings of $0.41 per share on $450 million in revenue.

Operating cash flow came to $133 million in the third quarter versus $95 million in the same period one year ago, up an impressive +40 percent increase. By quarter's end, the company's total deferred revenue balance was $1.3 billion, up +16 percent year on year.

Red Hat's Chief Financial Officer, Charlie Peters said that the company had achieved sequential revenue growth in every quarter for the past 51 consecutive quarters. Citing large transactions, Peters said that, "We believe the growing number and size of large deals reflects the increasingly strategic relationship that Red Hat is building with customers, in addition to customer demand for our broadening product portfolio.

Jim Whitehurst, President and Chief Executive Officer of Red Hat stated in the company's press release that, "Our strong Q3 results marked the eleventh straight quarter of mid-to-high teens revenue growth as we continued to reinforce and expand our strategic relationship with our customers," he continued saying, "Cloud computing and big data trends are driving increased demand for open source technologies. We believe our leadership position in the open source industry and broad portfolio of Open Hybrid Cloud technologies creates a strong position for Red Hat to capture market share in the cloud-enabled data center.

The company issued a convertible debt offering of $805 million in the third quarter, using $68 million to enter into convertible note hedge transactions. In addition, the company allocated $375 million to stock repurchases resulting in Red Hat buying about 5.3 million of its own shares.

Red Hat stock will open well above its yearly high this morning. With continued increases in revenue and net income, the stock could continue appreciating in the near, medium and long terms.

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Published on Dec 19, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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