Red Hat's Earnings Fall on Higher Expenses

Posted Dec 23rd 2009 10:30AM by Mark Fightmaster
Filed under: Earnings Reports, Red Hat Inc (RHT)

Linux provider Red Hat (RHT) released third-quarter earnings late Tuesday, announcing that net income fell 32% as a result of higher expenses. One of those expenses was an $8.8 million charge that settled a lawsuit, cutting three cents per share from earnings in the process.

Taking these charges out of the equation, RHT would have earned $33.5 million, or 17 cents per share. While these results were a penny short of RHT's third-quarter earnings last year, they managed to top the consensus estimate by a penny. Revenue also beat analyst projections, coming in at $194.3 million when $165.3 million was expected.

RHT rose in after-hours trading, and jumped nearly 6% in premarket trading this morning. The question is, how far can the stock go?

In after-hours activity, the stock traded above the $31 level, which could be a significant development. The $31 region has capped the shares several times in the past, namely 2004 and 2006. Will the equity be able to turn this resistance into support today? We shall see, but watch closely. If RHT closes below $31, it could signal that the resistance is far stronger than thought. A close above the $31 region could signal that the stock is ready to put this resistance in the past. If this is the case, RHT will be in uncharted territory, as the stock hasn't closed a month atop $31 since the turn of the century.

Tags: earnings, inthenews, Red Hat, RedHat, rht, technical analysis