The 10-second takeaway
For the quarter ended March 31 (Q1), Rackspace Hosting met expectations on revenues and missed estimates on earnings per share.
Compared to the prior-year quarter, revenue expanded significantly and GAAP earnings per share improved significantly.
Margins expanded across the board.
Rackspace Hosting reported revenue of $301.4 million. The 17 analysts polled by S&P Capital IQ wanted to see a top line of $300.0 million on the same basis. GAAP reported sales were 31% higher than the prior-year quarter's $230.0 million.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
EPS came in at $0.17. The 18 earnings estimates compiled by S&P Capital IQ predicted $0.18 per share. GAAP EPS of $0.17 for Q1 were 70% 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 71.1%, 140 basis points better than the prior-year quarter. Operating margin was 12.3%, 190 basis points better than the prior-year quarter. Net margin was 7.7%, 170 basis points better than the prior-year quarter.
Next quarter's average estimate for revenue is $319.3 million. On the bottom line, the average EPS estimate is $0.19.
Next year's average estimate for revenue is $1.32 billion. The average EPS estimate is $0.82.
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 866 members out of 928 rating the stock outperform, and 62 members rating it underperform. Among 210 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 194 give Rackspace Hosting a green thumbs-up, and 16 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 $56.95.
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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.