Red Hat Beats Estimates for 51st Consecutive Quarter

Red Hat (NYSE:RHT) released their third quarter 2015 report on December 18th. The computer software company beat estimates and shares subsequently shot up to a 52-week high of $72.11 during trading hours. Red Hat produces open source software, which can be modified by anyone and distributed with licenses. More than 90% of Fortune Global 500 companies use Red Hat software.

Analysts estimated that the software company would post revenue of $451.4 million, but Red Hat beat estimates and posted $456 million in revenue; a 15% year-over-year increase. Red Hat posted earnings per share of $0.42 on a non-GAAP diluted basis, beating analyst estimates of $0.40. The company also highlighted $133 million in operating cash flow, a 40% year-over-year increase.

Charlie Peters, Red Hat CFO, announced, “Outstanding sales execution in the third quarter drove strong performance across the board. We excelled on virtually every key financial metric we track.” He also pointed out that Red Hat has reported “sequential quarterly revenue growth… every quarter for 51 straight quarters.” Red Hat closed a record number of deals over $5 million and $10 million this quarter.

On December 19th, analyst Brian Schwartz of Oppenheimer reiterated a Buy rating on Red Hat and raised his price target from $74 to $80. Schwartz explained, “RHT’s app development-related and emerging technologies portfolio (45% growth in 3Q & YTD) is not cannibalizing its other businesses, and should reach ~$500M in two years, a scale and growth profile that only WDAY and NOW project within our SaaS universe.” He continued, “Red Hat appears set to close FY:2015 with strong momentum which strengthens our confidence in the name.”

Schwartz has a 71% overall success rate recommending stocks with an average return of +10% per recommendation.



Separately on December 19th, analyst Joel Fishbein of BMO Capital also reiterated a Buy rating on Red Hat and increased his price target from $68 to $77. Fishbein was pleased with the third quarter report but remains cautious that “Improving execution and broader adoption of the broadening portfolio continues to be overshadowed by continued FX headwinds.” The analyst concluded, “Red Hat is one of the best-positioned companies in infrastructure software, and we expect the multiple to expand as improving growth appears sustainable.”

Fishbein has an 80% overall success rate recommending stocks with an average return of +21.9% per recommendation.



The top analyst consensus for Red Hat on TipRanks is Strong Buy.