Rackspace Hosting, Inc. (NYSE:RAX) will release its First Quarter 2014 results After the market close on Monday, May 12, 2014. On the same day, management will host a conference call starting at 4:30 p.m. ET, 3:30 p.m. CT, 1:30 p.m. PT.
Wall Street anticipates that the cloud company will earn $0.12 per share for the quarter, which is $0.07 less than last year's profit of $0.19 per share. iStock expects Rackspace to hitWall Street's consensus number. The iEstimate is $0.12, too.
Sales, unlike earnings, are expected to increase, rising by a healthy 15.9% year-over-year (YoY). RAX's consensus revenue estimate for Q1 is $419.63 million, more than last year's $362.2 million.
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Rackspace Hosting offers a diverse portfolio of cloud computing services, including public, dedicated and private cloud, and hybrid hosting. The Company is a global company, selling its services to business customers in more than 120 countries.
Hitting Wall Street's target is the norm for RAX. Actual results equaled the consensus estimate eight of the last 16 quarterly announcements; however, things have become a more difficult lately.
The technology company missed the mark three of the last four quarters, falling short by an average of 12% less than forecasted. Those bearish misses were not kind to shareholder. RAX tumbled -15.6%, -15.9% and -19.30% in the three days surrounding the trio of EPS mishaps – OUCH! Meanwhile, the lone bullish beat in the last four got a yawn from investors, gaining just 0.7%.
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Although recent history is not favorable to earnings, two analysts upped their profit estimates within the last 30-days; one in the last week. That being said, the consensus of $0.12 is less than where analysts started the quarter: $0.15.
After reviewing RAX's income statement, we find some things we like and some we don't. We'll start with the don't like. Management increased general and administrative expenses (G&A) by 21.57% in 2013 versus sales growth of 17.23%. Had the executive team kept G&A in-line with sales growth, it would have added $10.6 million or $0.07 per share. The three misses in the last four quarters totaled $0.06.
On the plus side, Rackspace is investing heavily in research and development (R&D), and sales and marketing (S&M), both of which should payoff down the road.
Overall: Rackspace Hosting, Inc. (NYSE:RAX) struggled to hit the consensus in the last year, and the stock price has been worse off for it. If management can get G7A in-line with revenue growth, then misses might be less frequent, which could allow R&D and S&M time to pay off without killing the share price in the meantime.
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