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Red Hat, Inc. (RHT), Five Below Inc (FIVE): Three Earnings Reports That Caught My Attention Last Week

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As first-quarter earnings come to a close, I can’t help but point out that the majority of earnings reports we’ve covered over the past year have been better than expected. With so many companies reporting during the weeks that comprise earnings season, it’s easy for some earnings reports to fall through the cracks.

Each week for the past year, I’ve taken a look at three companies that could be worth further research after either beating or missing their profit expectations. Today, we’ll take a gander at three more companies that reported earnings last week. They may have slid under your radar, but they deserve a look.

Company Consensus EPS Reported EPS Surprise
Red Hat (NYSE:RHT) $0.30 $0.36 20%
Five Below (NASDAQ:FIVE) $0.38 $0.39 3%
JA Solar Holdings (NASDAQ:JASO) ($1.53) ($2.65) (73%)

Source: Yahoo! Finance.

Red Hat, Inc. (NYSE:RHT)
Following Red Hat, Inc. (NYSE:RHT)’s fourth-quarter earnings results, which delivered a 20% EPS beat but a $1 million revenue shortfall — and had the company down double-digits in percentage terms in after-hours — I figured we had yet another Oracle Corporation (NASDAQ:ORCL) situation on our hands. If you recall, Oracle shares were decimated after it warned of weakening software and hardware growth as it deals with increased hiring and the ongoing struggle of amalgamating Sun Microsystems’ hardware into its fold. However, if you look more closely at Red Hat, Inc. (NYSE:RHT)’s report, you’ll find out that all is actually well.

All credit goes to my Foolish colleague Anders Bylund for his deeper dive into Red Hat, Inc. (NYSE:RHT) following its earnings report. Anders notes that Red Hat has taken a more conservative approach to its accounting whereby it’s recognizing and allowing its larger multimillion-dollar-contract customers to make payments throughout the year instead of just one lump-sum, up-front payment. This serves to normalize revenue and boost backlog while also making Red Hat’s 17% quarterly revenue boost seem tamer than it actually was.

Red Hat’s razor-and-blade business model is also unique in that it relies on its open-source software to do all the talking and practically all of its marketing for the company. By allowing for free downloads of its software, it leaves enterprises free to customize and examine how Red Hat’s Linux-based platform will work for their business. If enterprises choose to upgrade to a paid version, Red Hat locks them into a recurring revenue stream with service and upgrade revenue potential.

Red Hat is a transparent company with a down-to-earth CEO, loaded with plenty of happy employees, and complete with oodles of perks. In short, it looks poised to continue its outperformance moving forward.

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