The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Rackspace Hosting beat slightly on revenues and met expectations on earnings per share.
Compared to the prior-year quarter, revenue increased significantly and GAAP earnings per share increased significantly.
Margins expanded across the board.
Rackspace Hosting reported revenue of $264.6 million. The 19 analysts polled by S&P Capital IQ foresaw a top line of $261.7 million on the same basis. GAAP reported sales were 32% higher than the prior-year quarter's $214.7 million.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
Non-GAAP EPS came in at $0.14. The 18 earnings estimates compiled by S&P Capital IQ anticipated $0.14 per share on the same basis. GAAP EPS of $0.18 for Q3 were 80% higher than the prior-year quarter's $0.10 per share.
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
For the quarter, gross margin was 70.8%, 190 basis points better than the prior-year quarter. Operating margin was 14.0%, 310 basis points better than the prior-year quarter. Net margin was 8.8%, 250 basis points better than the prior-year quarter.
Next quarter's average estimate for revenue is $280.9 million. On the bottom line, the average EPS estimate is $0.16.
Next year's average estimate for revenue is $1.02 billion. The average EPS estimate is $0.53.
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 778 members out of 835 rating the stock outperform, and 57 members rating it underperform. Among 236 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 221 give Rackspace Hosting a green thumbs-up, and 15 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 $47.13.
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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. Motley Fool newsletter services have recommended buying shares of 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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