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Valuation could be an issue if there's even a slight hiccup in Red Hat's numbers as the shares now trade at a forward price-to-earnings multiple of 45.4X compared to 10.8X for other software names like Microsoft (MSFT) and 11.2X for Oracle (ORCL).

The company has topped Wall Street's consensus view in eight straight quarters, delivering an average upside surprise of 9.25% over that stretch. Topline growth slowed on a sequential basis last quarter though. The sell side is slightly bullish on Red Hat with 14 of the 23 analysts covering the stock at either strong buy (5) or buy (9), but the median 12-month price target sits at $52.

Deutsche Bank weighed in on Monday ahead of the report, saying the stock's appreciation has raised the stakes.

"We expect Revenues/EPS of $291m/ $0.27 compared to street estimates of $291m/$0.27," said the firm, which has a hold rating and a $48 price target on Red Hat. "We expect billings to grow 22% y/y. However, we believe the buy side expectations are much higher, given the strong rebound in the stock to reach an all-time high after it had traded off following the billings miss in the previous quarter. Demand trends continue to be stable and we expect RHT to deliver an in-line quarter."

Check out TheStreet's quote page for Red Hat for year-to-date share performance, analyst ratings, earnings estimates and much more.

Family Dollar (FDO) will be in the spotlight for its quarterly results on Wednesday as well. Shares of the off-price retailer are up less than 2% year-to-date, closing Tuesday at $58.24. Analysts are looking for a profit of $1.13 a share in the company's fiscal second quarter on sales of $2.46 billion. Guggenheim Securities thinks a miss is very possible because of markdowns pressuring gross margins but it still likes Family Dollar as a long-term play.

"Although we expect a noisy operating performance and would not be surprised to see EPS come in below the $1.13 consensus, we think this is largely anticipated," wrote the firm on Monday. "Furthermore, increased confidence in FDO's growth potential, stemming from the efforts of Mike Bloom and his team, should trump this noise."

Guggenheim, which has a buy rating and a $65 price target on Family Dollar, thinks the heavy discounting is a "one-quarter issue," adding that "[W]e believe that (1) discretionary inventories are clean today and (2) FDO is actively reducing its planned receipts for later in the year."

Other companies slated to open their books on Wednesday include H.B. Fuller (FUL), Mosaic (MOS), Paychex (PAYX), Progress Software (PRGS), and Teavana Holdings (TEA).

Wednesday's economic calendar features the Mortgage Bankers Association's weekly application activity index at 7 a.m. ET; durable goods orders for February at 8:30 a.m. ET, and crude inventories at 10 a.m. ET.

The consensus estimate is calling for a 2.8% increase in total durable goods orders, according to Briefing.com, after a decline of 3.7% in January. Ian Shepherdson, chief U.S. economist at High Frequency Economics, is looking for a boost of 2% in total orders, and a 1% rise excluding transportation.

He thinks a month-to-month jump in orders for Boeing (BA) will help the total number, and expects the core to rebound after January's drop due to the expiration of the 100% tax deduction for most asset purchases on Dec. 31.

"The underlying trend before then was strongly upwards and we think January's 3.9% plunge will prove temporary," he wrote.

And finally, Sealy (ZZ) is bound to be a big mover on Wednesday after the mattress maker reported a surprise profit for its fiscal first quarter. The stock jumped more than 15% in after-hours action as the company delivered a profit of a penny per share vs. Wall Street's consensus view for a loss of 2 cents.

Sealy cited the strong launch of its higher priced Next Generation Stearns & Foster products, which helped gross margins in its U.S. business.

--Written by Michael Baron in New York.



>To contact the writer of this article, click here: Michael Baron.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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