The Raleigh, NC-based open source software company will likely report another solid quarter when it reports its fiscal 2016 third quarter earnings results after the market close on December 17, RBC said.
"Leveraging an open-source platform, a vibrant development community, and hardened support infrastructure, Red Hat is building a cost-effective, enterprise-class software platform including operating system, applications, and middleware across the server, workstation, and desktop domains," RBC said.
Red Hat has beat the high-end of its revenue guidance by an average of $6 million for the past four quarters, RBC said. If the trend continues, Red Hat should report revenue of about $529 million for the fiscal 2016 third quarter, the firm added.
Red Hat stock is down by 0.41% to $80.19 in early-morning trading on Tuesday.
Separately, TheStreet Ratings team rates RED HAT INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate RED HAT INC (RHT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 15.6%. Since the same quarter one year prior, revenues rose by 13.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RED HAT INC has improved earnings per share by 12.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, RED HAT INC increased its bottom line by earning $0.97 versus $0.93 in the prior year. This year, the market expects an improvement in earnings ($1.86 versus $0.97).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Software industry average. The net income increased by 9.8% when compared to the same quarter one year prior, going from $46.82 million to $51.40 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, RED HAT INC's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $120.28 million or 11.63% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.52%.
- You can view the full analysis from the report here: RHT
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.