Red Hat Continues to Rally on Solid Earnings

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Red Hat Inc. (NYSE: RHT) reported its fiscal third-quarter financial results after the markets closed on Thursday. The company had $0.48 in earnings per share (EPS) on $524 million in revenue, compared to consensus estimates from Thomson Reuters that called for $0.47 in EPS on $524.34 million in revenue. The same period from the previous year had $0.42 in EPS on $455.90 million in revenue.

Revenues in this quarter increased by 15% from last year, and by 21% in constant currency. Deferred revenue totaled $1.49 billion, which was an increase of 14% year over year. Subscription revenue for the quarter was $457 million, up 16%, or 22% measured in constant currency.

During the quarter, Red Hat repurchased $78 million worth of shares. There is currently $352 million remaining in the repurchase authorization.

In terms of guidance, the company expects EPS to be $0.47 and revenues to be in the range of $535 million to $539 million for the fourth quarter. There are consensus estimates that call for $0.48 in EPS on $533.37 million in revenue.

Jim Whitehurst, resident and CEO of Red Hat, commented on earnings:

Our investments in technologies and partnerships continued to generate strong results as customers transform their IT infrastructure through the increasing adoption of open source technologies and cloud computing. During the third quarter, we strengthened our leadership position in the open hybrid cloud by introducing new technologies and launching a strategic partnership with Microsoft and its Azure Cloud. Our initiatives are focused on enabling our customers to build, deploy and manage their applications across multiple environments and infrastructures.

Operating cash flow was $140 million for the third quarter, an increase of 5% from last year and up 16% year to date. On the books, cash, equivalents and investments totaled $1.87 billion.

Shares of Red Hat closed Thursday at $78.86, with a consensus analyst price target of $84.79 and a 52-week trading range of $60.34 to $83.00. Following the release of the earnings report, shares were up 2% at $80.46 in the after-hours session.