Rackspace Hosting Hits Estimates in Solid Quarter

Rackspace Hosting (NYSE: RAX  ) reported earnings on Nov. 6. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Sep. 30 (Q3), Rackspace Hosting met expectations on revenues and met expectations on earnings per share.

Compared to the prior-year quarter, revenue grew significantly and GAAP earnings per share expanded significantly.

Margins grew across the board.

Revenue details
Rackspace Hosting logged revenue of $336.0 million. The 17 analysts polled by S&P Capital IQ hoped for revenue of $335.2 million on the same basis. GAAP reported sales were 27% higher than the prior-year quarter's $264.6 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.19. The 18 earnings estimates compiled by S&P Capital IQ anticipated $0.19 per share. GAAP EPS of $0.19 for Q3 were 36% higher than the prior-year quarter's $0.14 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 71.8%, 200 basis points better than the prior-year quarter. Operating margin was 13.5%, 180 basis points better than the prior-year quarter. Net margin was 8.1%, 50 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $357.3 million. On the bottom line, the average EPS estimate is $0.22.

Next year's average estimate for revenue is $1.31 billion. The average EPS estimate is $0.76.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 891 members out of 962 rating the stock outperform, and 71 members rating it underperform. Among 214 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 189 give Rackspace Hosting a green thumbs-up, and 25 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Rackspace Hosting is outperform, with an average price target of $59.48.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Rackspace Hosting. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 07, 2012, at 1:51 AM, Bloggs1015 wrote:

    Thoughts on this company? A great business but on a huge P/E ... how much upside is there left in the stock?

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