Red Hat Beats on Both Top and Bottom Lines

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Red Hat (NYS: RHT) reported earnings yesterday. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Feb. 29 (Q4), Red Hat beat slightly on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue improved significantly and GAAP earnings per share improved.


Gross margins grew, operating margins expanded, net margins contracted.

Revenue details
Red Hat tallied revenue of $297.0 million. The 21 analysts polled by S&P Capital IQ expected to see net sales of $291.3 million on the same basis. GAAP reported sales were 21% higher than the prior-year quarter's $244.8 million.

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Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
Non-GAAP EPS came in at $0.29. The 23 earnings estimates compiled by S&P Capital IQ predicted $0.27 per share on the same basis. GAAP EPS of $0.18 for Q4 were 5.9% higher than the prior-year quarter's $0.17 per share.

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Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 85.1%, 210 basis points better than the prior-year quarter. Operating margin was 16.3%, 20 basis points better than the prior-year quarter. Net margin was 12.1%, 160 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $310.9 million. On the bottom line, the average EPS estimate is $0.27.

Next year's average estimate for revenue is $1.35 billion. The average EPS estimate is $1.19.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 606 members out of 733 rating the stock outperform, and 127 members rating it underperform. Among 201 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 175 give Red Hat a green thumbs-up, and 26 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Red Hat is outperform, with an average price target of $49.74.

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At the time this article was published Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor ofMotley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. 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.

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