Open source software solutions provider Red Hat Inc (NYSE:RHT) and recreational vehicle (RV) manufacturer Thor Industries, Inc. (NYSE:THO) both came out with their latest quarterly results yesterday after the bell. Whereas the former managed to beat the Street’s expectations, the latter’s results came in below the estimates. In this article we are going to take a look at the results of both these companies and the hedge funds’ sentiment towards them to see if an actionable pattern emerges out of it.
Let’s start with Red Hat Inc (NYSE:RHT), which reported EPS of $0.47 for the second quarter of fiscal 2016, an almost 15% increase on the year, while the revenue came in at $504.10 million, significantly above the $445.90 million delivered a year earlier. The consensus estimate among analysts was for the company to report EPS of $0.44 on revenue of $494.65 million. Although revenue for the quarter was up 13% year-over-year in US dollar terms, excluding currency headwinds it was up 21% year-over-year. Quarterly subscription revenue for Red Hat Inc (NYSE:RHT) was up by an annual 13% to $442 million, whereas its operating cash flow saw a 12% year-over-year jump to $120 million. For the next quarter the company expects EPS of $0.47 and revenue in the range of $519 million to $523 million. Additionally, for the full fiscal year 2016 Red Hat forecasts EPS between $1.85 and $1.87 and revenue in the range of $2.03 billion to $2.04 billion.
Although shares of Red Hat have lost some sheen in the past couple of weeks, the rally that they saw from March to July has ensured that they are still trading up by 4.66% year-to-date. The number of hedge funds covered in our database that reported a stake in Red Hat jumped by seven to 40 during the second quarter, while the aggregate value of their holdings saw an increase of $203 million to $754.4 million. Billionaire David E. Shaw‘s D.E. Shaw, Brett Barakett‘s Tremblant Capital and Ken Griffin‘s Citadel Investment Group were among the investors that increased their holdings in the company significantly during the second quarter and reported some 1.10 million shares, 891,300 shares and 820,100 shares of Red Hat in their respective 13F filings. With the company delivering better than expected results and its popularity among hedge funds rising, we feel the stock of Red Hat has everything going for it to appreciate in the medium- to long-run.
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Moving on to Thor Industries, Inc. (NYSE:THO), which reported a net income of $69 million or $1.31 per share for the fourth quarter of fiscal year 2015, compared to net income of $66.6 million or $1.25 per share it had reported for the same quarter last year. Analysts were projecting the company to report EPS of $1.30 for the quarter. Although the revenue of $1.06 billion that the company reported for the quarter was up 1.4% year-over-year, it missed analysts’ expectations of $1.15 billion. For the full fiscal year 2015, Thor Industries, Inc. (NYSE:THO) reported EPS of $3.80 on revenue of $4 billion, compared to estimated EPS of $3.79 and revenue of $4.10 billion. Sales of the towable RVs during the quarter were down 3% year-over-year and sales of motorized RVs also saw a year-over-year drop of 0.64%, however, the company managed to offset these lower figures with the revenue it earned through its recent acquisition of Postle Aluminum Co.
The stock of Thor Industries had a decent rally during the first three months of the year, but has witnessed gradual decline since then and currently trades marginally down by 2% year-to-date. This downward journey started at the beginning of the second quarter, perhaps explains why even though the number of hedge funds tracked that were long on the company increased to 18 from 16 during the quarter, the total value of their positions dropped by almost $110 million to $$263.66 million. Among these investors, Chuck Royce‘s Royce & Associates, which has been the largest shareholder of the company for the past several quarters (among the funds tracked by us), has been reducing its stake in it for the past three quarters and at the end of June held nearly 3.63 million shares. This continuous sale of shares by one of its largest shareholders, coupled with a lackluster popularity among the smart money and the quarterly performance of the company being not quite up to the mark, seems to suggest that Thor Industries’ stock will continue to remain range-bound in the near future like it has been in the past few weeks.
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