Red Hat Inc. (RHT) is joining the prestigious S&P 500 index after the close of trading on Friday, July 24. The S&P is knocking off the beleaguered CIT Group Inc. (CIT) from its 500 list, filling the slot with the open source software provider.
The world's largest provider of Linux software beat earnings estimates in the recent first quarter by 7.1%. Red Hat has weathered the recession somewhat because it sells subscriptions to maintenance contracts for the Linux software, locking in users for multiple years.
Operating margin, excluding items, for the first quarter rose to 23.4% from 21.8% last year. The company has been benefitting under the scrutiny of its cost-conscious CEO -- James Whitehurst -- who has helped improve profitability.
The stock of any company entering the S&P 500 may rise, as investors tracking the index will have to buy shares of the company. The move to the S&P 500 also tends to increase a stock's visibility. Institutional investors currently own 93.9% of the Red Hat's outstanding float.
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