Tag Archives: rhel

Red Hat Q4 Earnings Beat Views, But Q1 Profit Outlook Merely Meets

Leading Linux software provider Red Hat ( RHT ) late Tuesday reported fiscal Q4 earnings and revenue that beat Wall Street expectations and helped ease fears of tech spending softening, but its EPS outlook for the current quarter merely met views. Shares were down 4% in after-hours trading, after the earnings release. In Tuesday’s regular session, Red Hat stock rose 1.1% to 75.71. Shares had touched a 15-month low below 60 last month after hitting a 16-year high above 84 in December. The Raleigh, N.C.-based company posted earnings per share minus items of 52 cents, up 21% from the year-earlier quarter. Sales for the quarter that ended Feb. 29 rose 17% to $544 million. Both numbers beat the consensus estimate. Analysts polled by Thomson Reuters on average had expected the cloud vendor to report EPS ex items of 47 cents on revenue of $537 million. For its fiscal Q1, Red Hat guided EPS ex items at 50 cents on revenue of $558 million to $566 million, vs. 44 cents and $481 million in the year-earlier quarter. Analysts had modeled 50 cents and $554.6 million, so while the sales outlook beat, the EPS outlook merely met. Drexel Hamilton analyst Brian White called Q4 “another strong quarter” with a “strong revenue outlook” in a research note after the earnings release. Red Hat revenue comes from subscriptions that customers pay for support, training and integration services in using the open-source version of its Linux operating system. The platform includes applications, middleware, desktop domains and an operating system. Red Hat was founded 23 years ago. “The fourth quarter marked our 56 th consecutive quarter of revenue growth, contributing to Red Hat’s first fiscal year crossing $2 billion in total revenue,” Red Hat CEO Jim Whitehurst said in the company’s earnings release. “The fourth quarter was a strong close to the year as our results exceeded our guidance. “We maintained a high level of execution throughout the fiscal year, which contributed to greater than 20% constant currency revenue growth in each quarter.” Red Hat Reports Record Year-End Backlog Of $2.13 Billion Red Hat said that it had ended the year with a record backlog of $2.13 billion, up 15% year over year. The company has made a strategic shift to cloud computing, a fast-growing tech field dominated by Amazon.com ( AMZN ), Microsoft ( MSFT ) and Alphabet ( GOOGL ). Red Hat has been able to carve out a share of the pie. It focuses on hybrid cloud services, which partly use the low-cost public cloud and partly provide the privacy of private cloud services. “Investors have asked whether the public cloud is a positive driver for Red Hat,” Whitehurst said on the company’s earnings conference call. “We firmly believe that it will be a hybrid cloud world where applications will run across all four footprints — physical, virtual, private cloud and public cloud. “We are providing technologies that enable choice and consistency across all four environments, and we enhance this value with application development technologies, storage and management.” In November, Red Hat announced a partnership with Microsoft, which made the Red Hat Enterprise Linux (RHEL) available on Microsoft’s Azure cloud platform. As part of the deal, Red Hat will provide Microsoft with its enterprise version of Linux for use as the “preferred choice” on Microsoft’s Azure cloud services. Microsoft, formerly a rival, has been rolling out other Red Hat products, including its JBoss Enterprise Application Platform, Gluster Storage and platform-as-a-service product OpenShift. In a research note Monday, Drexel analyst White said that the movement toward open-source software and the momentum to cloud computing “will provide enough of a tailwind to offset any macro softening.” White rates Red Hat stock a buy, with a price target of 98. “We believe Linux will continue to gain market share in 2016 as next-generation applications are developed on RHEL, while we look forward to development of the Microsoft partnership,” White wrote. In a research note last week, Deutsche Bank analyst Karl Keirstead raised the issue about competition from Amazon, which offers a free Linux open-source operating system and support via its cloud-based Amazon Web Services platform. He concluded that the number of migrations from RHEL to Amazon Linux remains quite modest and mostly confined to small enterprise customers. “Larger RHEL-centric customers have only a small mix of workloads on Amazon Web Services, they value operating system consistency across their hybrid infrastructures, they prefer support from Red Hat and/or view the cost savings of a switch as being too modest to be worth the hassle,” Keirstead wrote. He reiterated a buy rating on Red Hat stock, with a 95 price target. Image provided by Shutterstock .  

Red Hat Warms Up, And Microsoft Azure Hasn’t Even Kicked In Yet

Didn’t take long for investors to follow analyst Gregg Moskowitz’s upgrade clue. Red Hat ( RHT ) stock turned red hot again briefly, up 3% in morning trade in the stock market today , before cooling to close up 1.4% at 68.62 Thursday, 19% off a 16-year high of 84.44 touched Dec. 30. An analyst for Cowen, Moskowitz had just issued a research report Thursday morning, making the case that Red Hat’s “valuation looks compelling once again” and upgrading the stock to outperform from market perform with an 86 price target. Red Hat, based in Raleigh, N.C., is the fast-growing developer of software, built on the open-source Linux operating system, that manages vast enterprise data, be they in the cloud or in traditional on-premise operations. Microsoft ( MSFT ) announced in November that it would run Red Hat hybrid software on Azure, Microsoft’s cloud service. How fast is Red Hat moving? Earnings grew 14% and revenue 15% in the third quarter ended Nov. 30, although analysts polled by Thomson Reuters think that for the current quarter, Q4, profit will moderate to 9% growth from a year earlier of 47 cents per share minus items, on sales up 15.7% to $537 million. “While we have been positive on the stock for a long time, our recent market perform rating was largely valuation-based,” Moskowitz said. “However, the stock has significantly underperformed this year (down 18%, vs. the Nasdaq down 10%), which has presented investors with a favorable risk/reward once again.” Moskowitz said that his crew’s recent checks with midsize and big IT customers suggest that Red Hat Enterprise Linux (RHEL) — its core software, first issued 13 years ago — is likely to grow faster than the 2% annual pace that research firm Gartner gives the overall Linux market. “Meanwhile, though not yet inflecting, demand for OpenStack continues to rise, and we expect another year of high growth (off a still relatively low base),” Moskowitz wrote. OpenStack is a free, open-source software platform for cloud computing. “We also believe RHT’s recent partnership with Microsoft Azure (not in our numbers) should create significant revenue synergies for RHEL (and Azure) over time,” Moskowitz added. “Further, one of our public cloud contacts we recently spoke with sees material upside from the partnership and believes the power of Microsoft’s distribution could also drive an inflection in sales for RHT’s CloudForms hybrid cloud management software. “Longer term, we believe containers will become increasingly prevalent and that RHT is very well placed to benefit from this unfolding trend, with native support built into RHEL and OpenShift, and with RHEL Atomic Host specifically targeting the opportunity.” Containers allow software to run reliably in a variety of computing environments. OpenShift is a Red Hat platform-as-a-service product; RHEL Atomic Host is an operating system. With a market cap of $12.5 billion, Red Hat is the third largest member of IBD’s Computer Software-Desktop industry group — led, of course, by Microsoft with about a $409 billion market value. Adobe Systems ( ADBE ) is second-largest at just over $43 billion. Red Hat’s stock, however, earns a 79 Composite Rating, which means that it performs better than 79% of all publicly traded firms on a variety of metrics. Microsoft carries a slightly better Composite Rating of 83 and Adobe a strong 96. Microsoft closed down 0.4% Thursday and Adobe fell 1.3%.