Rackspace Hosting Earnings Preview

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Rackspace Hosting (NYS: RAX) came in under analysts' estimates last quarter but now has a chance to fix things this quarter. The company will unveil its latest earnings Thursday. Rackspace Hosting is a provider of hosting and cloud computing services.

What analysts say:

  • Buy, sell, or hold?: Analysts think investors should stand pat on Rackspace Hosting with 12 of 19 analysts rating it hold. Analysts don't like Rackspace Hosting as much as competitor Equinix overall. Seventeen out of 24 analysts rate Equinix a buy compared with seven of 19 for Rackspace Hosting. While analysts still rate the stock a Hold, they are a little more optimistic about it compared with three months ago.
  • Revenue Forecasts: On average, analysts predict $241.3 million in revenue this quarter. That would represent a rise of 28.8% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.12 per share. Estimates range from $0.11 to $0.15.

What our community says:
CAPS All-Stars are solidly behind the stock with 95.6% awarding it an "outperform" rating. The community at large concurs with the All-Stars with 94.2% granting it a rating of "outperform." Fools are keen on Rackspace Hosting and haven't been shy with their opinions lately, logging 195 posts in the past 30 days. Even with a robust four out of five stars, Rackspace Hosting's CAPS rating falls a little short of the community's upbeat outlook.

Management:
Rackspace Hosting's profit has risen year over year by an average of 51.5%.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q1

Q4

Q3

Q2

Gross Margin

69.7%

68.9%

67.6%

67.2%

Operating Margin

10.4%

10.9%

10.8%

9.5%

Net Margin

6.0%

6.3%

5.9%

6.0%

For all our Rackspace Hosting-specific analysis, including earnings and beyond, add Rackspace Hosting to My Watchlist.

Motley Fool newsletter services have recommended buying shares of Rackspace Hosting.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

At the time this article was published

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