Are the Hatters the victims of unreal expectations?

Red Hat (NYSE: RHT) earnings and revenues soared past Wall Street expectations on Tuesday, its revenue forecast exceeds analysts’ targets and the Raleigh-based Linux giant tops $2 billion in revenue for the first time. The Street’s reaction?

No surge in share price and analysts firms seem to say “ho, hum.”

Yet CEO Jim Whitehurst is very upbeat. as WTW reports in his very bullish comments about how the “cloud” is driving Red Hat sales higher.

Some numbers:

  • Red Hat reported its 56th consecutive quarter of growth, growth driven by subscription sales and cloud
  • Revenues in the fourth quarter surged 17.1 percent to $543.5 million
  • Earnings climbed to $53 million, or 29 cents, compared to a year earlier
  • Minus exceptions, earnings were 52 cents or $97 million compared to 46 cents and $80.6 million as forecast by a Thomson Reuters poll of analysts
  • Revenue for the current quarter was “lin line” with analysts’ forecasts of 50 cents
  • But for the year, Red Hat bumped guidance to $2.22 or so per share and $2.35 billion in revenue from $1.86 and $2.044 billion, which analysts had embraced

Yet shares barely moved in after-hours trading.

The stock already is well regarded with “buy” ratings. So perhaps it’s unfair to expect much more Street excitement.

Citigroup reiterated its “buy” rating on RHT and upped its share target to $90.

BMO Capital and Mizuho Securities also reiterated “outperform” and “buy” ratings respectively, but BMO did lower its target to $88 from $90. Mizuho reiterated its target of $88.

At least there was some excitement in news reports as the following sample shows:

  • Red Hat Is Now a $2 Billion Open-Source Baby


“Linux leader kept its promise. Mission accomplished. Red Hat, which promised a few months ago to hit $2 billion in annual revenue, has done so and now claims to be the world’s first open-source company to reach that milestone.”

  • Red Hat becomes first $2b open-source company


“Just think: Some people still don’t believe that you can make money from Linux and open-source software. Fools! Red Hat just became the first open-source company to make a cool 2 billion bucks. Not bad …”

  • Red Hat quarterly revenue rises 17.1 percent


Red Hat Inc (RHT.N), the world’s largest commercial distributor of the Linux operating system, reported a 17.1 percent rise in quarterly revenue, helped by higher demand for open-source software and cloud offerings. The company’s net income rose …”

  • Red Hat tops expectations, issues upbeat guidance


“Red Hat Inc. offered an upbeat outlook for the year after easily topping fourth-quarter expectations, thanks to growing demand for the company’s open-source software and cloud infrastructure.”

But Barron’s captured best the ho-hum attitude:

  • Red Hat Slips Despite FYQ4 Beat, Higher Q1, Year Views


Linux and open source software distributor Red Hat (RHT) this afternoon reported fiscal Q4 revenue and earnings per share that topped analysts’ expectations, and the company’s outlook for this quarter’s revenue also topped consensus, as did its year …”

Red Hat closed Tuesday at $75.71. up 81 cents. That’s still well off the 52-week high of $84.44 reached on Dec. 30 – but it’s a long way back from $60.93 in early February when just about all of Wall Street had fallen into doldrums.

Overall, analysts remain very positive with eight calling RHT a “strong buy” and 18 a “buy” compared to five “holds” and one “underperform.”