Big Partners Boost Rackspace Footprint, Revenues

By Paul Ausick Updated Apr 27, 5:38PM EDT · Published Aug 10, 4:19PM EDT

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Rackspace Hosting Inc. (NYSE: RAX) reported second quarter 2015 results after markets closed Monday evening. For the quarter, the web-hosting and cloud services company posted diluted earnings per share (EPS) of $0.20 on revenues of $489.4 million. In the same period a year ago, the company reported EPS of $0.16 on revenues of $441.11 million. Second-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.20 and $490.54 million in revenues.

The company guided third quarter revenues higher by 2% to 3.5% on a constant currency basis. Adjusted EBITDA margins are forecast at 33% to 34%. For the fourth quarter Rackspace estimates revenues to rise by 2% to 3.5% on a constant currency basis and adjusted EBITDA margins to equal the third quarter forecast. For the full year revenues are forecast to rise 12% to 14% on a constant currency basis and the company expects adjusted EBITDA of between 33% and 34%.

The consensus analysts’ estimate for EPS in the third quarter is $0.22 per share and the revenue estimate totals $511.14 million. For the full year analysts are looking for $0.87 in EPS on $2.01 billion in revenues.

The company’s CEO, Taylor Rhodes, said:

During the second quarter, we made progress on several key fronts, including with our 50 largest enterprise customers, whose spending with us is growing at more than twice the rate of our overall business. We expanded our managed cloud strategy by providing our expertise and Fanatical Support on Microsoft Azure. We’ve launched a major partnership with Intel to make OpenStack public, private and hybrid clouds easier to deploy, more scalable and more secure. And we continue to make progress toward building the market-leading managed services offer for customers on the AWS cloud.

Revenue growth of 11% almost always grabs investors’ attention and today’s report from Rackspace is no exception. Shares traded up about 5.8% after-hours on Monday at $33.27 in a 52-week range of $28.80 to $56.20. Thomson Reuters had a consensus analyst price target of around $49.94 from 18 brokers prior to today’s report.

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About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.