Analysts Bullish On Red Hat Ahead Of Q4 Earnings

Red Hat Inc RHT is scheduled to report fourth-quarter results after the close Monday, March 26, and multiple Wall Street analysts are expecting the open source solution provider to deliver strong earnings.

The Analysts

Stifel's Brad Reback maintains a Buy rating on Red Hat's stock with an unchanged $150 price target.

Morgan Stanley's Keith Weiss maintains an Equal-weight rating on Red Hat with an unchanged $130 price target.

Stifel: Solid Close To Fiscal 2018

Red Hat is expected to report upside to an 81-cents-per-share earnings estimate and $762.3-million revenue estimate on the back of ongoing demand for hybrid cloud products and services, Reback said in a note.

Stifel projects billings of $1.109 billion, a 12.4-percent jump from a year ago and below the consensus figure of 13.6 percent. 

Red Hat's Q4 report should confirm the company still manages to "elevate its strategic positioning" and can sustain a low-to-mid-teens growth rate, 30-percent emerging product growth and billings growth in the mid-teens, Reback said. 

Morgan Stanley: What To Watch For 

Red Hat's earnings should come in better than expected, but investors should be looking for three key data points, Weiss said in a note. They are:

• Durable mid-teens growth in the Enterprise Linux business.
• Acceleration of growth in the emerging business segment aided by growing demand for the OpenShift and OpenStack platforms.
• Rising margins that push cash flow growth above the 20-percent mark.

Price Action

Shares of Red Hat are sitting around the $150 area, up about $25 per share since the start of the year. The stock closed Friday down 2.09 percent at $147.90. 

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