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Red Hat, Inc. (RHT) Information Technology – Software | Reports March 22, After Market Closes

In the past few years, cloud computing has been one of the fastest growing industries, dominated by large name companies in Amazon, Microsoft and Google. However, even smaller names, Red Hat being one of them, are getting a piece of the action. Red Hat is seeing strong upward momentum lately, improving earnings and sales in each of the past 6 quarters. Expectations are high that the company can extend its streak to 7 when they report fourth quarter earnings tomorrow, after the market closes. 

The Estimize consensus calls for EPS of $0.48, one cent above Wall Street and guidance, while revenue expectations of $537.56 million are $1.35 million above the Street and roughly in-line with guidance. However, our Select Consensus is even higher than the mean, with EPS expectations of $0.49 and revenues of $538.35 million. The Estimize community has been slightly bearish on Red Hat’s earnings in the past three months, revising EPS estimates down 1%. Still, these estimates predict as a YoY increase of 12% on the bottom line, while sales are expected to grow 16%. Red Hat has consistently outperformed expectations, beating both the Estimize EPS and revenues consensus 71% of the time.

Red Hat is one of the leaders in open source technology and has been hard at work making improvements to many of its services. Most of the focus has been on the cloud, as RHT looks to provide a solid support base and a cost friendly platform which includes applications, middleware, desktop domains, and an operating system. Late last year, the company made its Red Hat Enterprise Linux (RHEL) available on Microsoft’s Azure cloud and has made support available for Microsoft Azure on its CloudForms hybrid cloud management system. Cloud subscription services alone bring in close to $100 million in revenue, the integration with Azure will certainly add to this figure. Furthermore, Red Hat has been working with Alcatel-Lucent, a French global telecommunications equipment company. The two came to an agreement in December, in which their pre-existing partnership on CloudBand, Alcatel-Lucent’s platform for network functions virtualization (NFV), and RHEL, would be expanded upon. Essentially, Red Hat will assist Alcatel-Lucent with the task of improving NFV based features in the telecommunications realm within open source.