Red Hat Inc (NYSE:RHT)
Information Technology - Software | Reports June 22, After Market Closes
Key Takeaways
- The Estimize consensus is calling for earnings per share of 52 cents on $565.68 million in revenue, 2 cents higher than Wall Street on the bottom line and $2 million on the top
- Recent partnerships with Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) have already had an impact and positions the company for long term growth
- Continued acquisitions are beneficial in the long term but will have an adverse impact on margins
In the past few years, cloud computing has been one of the fastest growing industries, dominated by large name companies such as Amazon, Microsoft and Google (NASDAQ:GOOGL). However, even smaller names, Red Hat Inc (NYSE:RHT) being one of them, are getting a piece of the action. Red Hat is seeing strong upward momentum lately, improving earnings and sales in each of the past 8 quarters. Expectations are high that the company can extend its streak with when it kicks off fiscal 2017 tomorrow afternoon. The stock is already pricing in a beat, increasing nearly 7% in the past 3 days.
The Estimize consensus is calling for earnings per share of 52 cents on $565.68 million in revenue, 2 cents higher than Wall Street on the bottom line and $2 million on the top. Currently, estimates are also higher than guidance issued by the company in March’s Q4 analyst call. Compared to a year earlier this represents a projected 18% increase in both earnings and sales. Typically, the stock doesn’t move around earnings season but based on the current movement that could change this quarter.
Red Hat is one of the leaders in open source technology and has been hard at work making improvements to many of its services. Most of the focus has been on the cloud, as RHT looks to provide a solid support base and a cost friendly platform which includes applications, middleware, desktop domains, and an operating system.
Late last year, the company made its Red Hat Enterprise Linux (RHEL) available on Microsoft Azure and Amazon Web Services. Cloud subscription services alone bring in close to $100 million in revenue, the integration with Azure will certainly add to this figure. Red Hat has seen a boost from its partnerships, and is well positioned for long term growth.
Furthermore, Red Hat has been working with Alcatel-Lucent (PA:ALUA), a French global telecommunications equipment company. The two came to an agreement in December, in which their pre-existing partnership on CloudBand, Alcatel-Lucent’s platform for network functions virtualization (NFV), and RHEL, would be expanded upon. Essentially, Red Hat will assist Alcatel-Lucent with the task of improving NFV based features in the telecommunications realm within open source.
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