Rackspace Trips Over Guidance

By Chris Lange Updated Jan 13, 1:07PM EST · Published Feb 16, 5:18PM EST

Rackspace Trips Over Guidance — © Thinkstock

Rackspace Holding Co. (NASDAQ: RAX) reported fourth quarter financial results after the markets closed on Tuesday. The company had $0.24 in earnings per share (EPS) on $522.8 million in revenue compared to consensus estimates from Thomson Reuters that called for $0.23 in EPS on $521.39 million in revenue. The same period from the previous year had $0.26 in EPS on $472.42 million in revenue.

In terms of guidance, the company expects revenue to be in the range of $517 million and $521 million for the first quarter, and to be $2.08 billion to $2.16 billion in revenue for the 2016 full year. There are consensus estimates that call for $530.68 million in revenue in the first quarter and $2.21 billion in revenue for the full year.

During this quarter the company repurchased $117 million worth of its shares, under its current authorization from the board.

At the end of the fourth quarter, adjusted free cash flow was $85 million. Cash and cash equivalents totaled $485 million.

Taylor Rhodes, CEO and President of Rackspace, commented on earnings:

We made significant progress on our strategic and financial goals in the fourth quarter, including the launch of Fanatical Support for the world’s leading clouds. We saw encouraging demand for our Fanatical Support for AWS offer, signing up our first 100 customers through the end of January. We intend to be the number one managed services provider for AWS, and we are well on our way toward that goal. Second, we showed that our business is becoming less capital intensive, resulting in higher free cash flow, which we continued to share with our stockholders through our buyback program.

Shares of Rackspace closed Tuesday up 3.1% at $18.17, with a consensus analyst price target of $37.28 and a 52-week trading range of $16.38 to $56.20. Following the release of the earnings report, the stock was down 8% at $16.72.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.