Red Hat Earnings and Guidance Not Enough for Investors

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When Red Hat Inc. (NYSE: RHT) reported its fiscal third-quarter financial results after the markets closed on Tuesday, the company posted $0.73 in earnings per share (EPS) on $748 million in revenue. That compared with consensus estimates from Thomson Reuters of $0.70 in EPS and revenue of $734.4 million. In the same period of last year, it said it had EPS of $0.61 and $615.3 million in revenue.

During the quarter, subscription revenue from infrastructure-related offerings was $495 million, an increase of 15% year over year, or 14% measured in constant currency.

Deferred revenues totaled $2.11 billion at the end of the quarter, an increase of 23% from the same time last year.

Looking ahead to the fiscal fourth quarter, Red Hat expects to see EPS of $0.81 and revenues in the range of $758 million to $763 million. The consensus estimates are $0.75 in EPS and $748.91 million in revenue for the quarter.

On the books, Red Hat cash, cash equivalents and short-term investments totaled $1.72 billion at the end of the quarter, up from $1.46 billion at the end of the previous fiscal year.

Jim Whitehurst, president and CEO of Red Hat, commented:

We again delivered over 20% year-over-year growth in both subscription revenue and total revenue due to strong customer demand for hybrid cloud technologies, including our core technologies, container platforms and solutions that enable and manage multiple cloud and private cloud environments. Our growing strategic position within enterprise IT organizations is evidenced by the strong cross selling of our broad portfolio of technologies, which led to 30% year-over-year growth in deals over $1 million and over 40% growth in Application Development-related and other emerging technology subscription revenue.

Shares of Red Hat down over 5% at $112.12 Wednesday morning, with a consensus analyst price target of $127.21 and a 52-week range of $68.54 to $130.93.