Red Hat Earnings: The Streak is Broken

S&P 500 (NYSE:SPY) component Red Hat Inc. (NYSE:RHT) reported its results for the second quarter. Red Hat is engaged in providing open source software solutions. They are known for their version of Linux, Red Hat Enterprise Linux.

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Red Hat Inc. Earnings Cheat Sheet

Results: Net income for Red Hat Inc. fell to $35 million (18 cents per share) vs. $40 million (20 cents per share) a year earlier. This is a decline of 12.4% from the year-earlier quarter.

Revenue: Rose 14.7% to $322.6 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Red Hat Inc. fell short of the mean analyst estimate of 21 cents per share. It beat the average revenue estimate of $310.8 million.

Quoting Management: “Our double-digit growth was driven by demand for Red Hat’s open source technologies that are key to creating innovation, scale and flexibility in our customers’ data centers and their businesses,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. “At Red Hat, we firmly believe in the strength of community-powered innovation. In early September, we were pleased to be recognized by Forbes, Inc. on its list of the World’s Most Innovative Companies. We are also proud that our customers who have built mission-critical systems on Red Hat technologies are also reflected on the Forbes list of innovative companies.”

Key Stats:

For the past five quarters, the company has seen double-digit year-over-year percentage revenue growth. Over that span, the company has averaged growth of 21.2%, with the biggest boost coming in the second quarter of the last fiscal year when revenue rose 28% from the year earlier quarter.

Last quarter’s profit decrease ends a four-quarter streak of profit increases. In the first quarter, net income rose 15.4% from the year earlier, while the figure increased 7.3% in the fourth quarter of the last fiscal year, 47% in the third quarter of the last fiscal year and 69% in the second quarter of the last fiscal year.

The company fell short of estimates last quarter after beating the mark the quarter before with net income of 20 cents versus a mean estimate of net income of 19 cents per share.

Looking Forward: Over the last 30 days, analysts have not been optimistic about the company’s next-quarter performance. The average estimate for the third quarter is now 22 cents per share, down from 24 cents. For the fiscal year, the average estimate has moved down from 90 cents a share to 87 cents over the last thirty days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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