Rackspace Forecast Hurt by Strong Dollar

For the full year, Rackspace posted EPS of $0.77 on revenues of $1.79 billion, compared with 2013 EPS of $0.61 and revenues of $1.53 billion. Consensus estimates called for EPS of $0.70 on revenues of $1.8 billion.

The company guided first-quarter revenues higher by 2.0% to 3.5% on a constant currency basis. The company expects a full percentage point of currency exchange headwinds, however, resulting in GAAP revenue of $477 million to $484 million. Analysts were estimating revenues of $490.15 million and EPS of $0.21.

For the full year, Rackspace projects revenue growth of 14% to 18% on a constant currency basis and expects a 200-basis point headwind from currency exchange rates for the year. GAAP revenue is forecast at $2.0 billion to $2.1 billion, compared with a consensus estimate of $2.08 billion.

The company also said that it expects first-quarter adjusted EBITDA margin to range between 32% and 34%, compared with 35% in the fourth quarter. For the full year, the company forecasts adjusted EBITDA margin in a range of 33% to 36%, compared with 33.7% in 2014.

The company’s CEO said:

The strong growth and improving margins that we’ve posted demonstrate the traction that we’re gaining as the leader of the managed cloud segment. We will build on this momentum in 2015 by expanding the specialized expertise that we offer in areas such as ecommerce, big data and security.

Shares traded down about 4.5% after-hours on Tuesday, at $47.62 in a 52-week range of $26.18 to $50.65. Thomson Reuters had a consensus analyst price target of around $50.00 before the earnings report.

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