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Rational tops third quarter forecasts

Rational Software (Nasdaq: RATL) topped analyst forecasts in the third quarter.

After market close Wednesday, the maker of Internet software development tools reported fiscal third quarter net income of $40.2 million, or 20 cents per share, excluding goodwill writedowns and expenses from Rational's recently acquired Catapulse unit. Analyst consensus predicted a profit of 18 cents per share on revenue of $204 million.

Shares of Rational traded at 41.375 in afterhours activity on the Island electronic communications network, immediately following the release of quarterly results. Rational rose 2.3125 to 39.125 in Wednesday's regular trading ahead of the earnings report.

Including all charges, Rational earned $26.5 million, or 13 cents per share.

Third quarter revenue increased 47 percent year-over-year to $215.5 million. The company saw strong growth in all parts of the world, said Paul Levy, chairman and co-founder.

Analysts generally expected to slightly exceed their published estimates. "Rational Software should continue to benefit from increasing demand for high-quality and fast software deployment cycles required into today's e-business environment," wrote Sarah Mattson, analyst with Dain Rauscher Wessels, which has a "strong buy, aggressive" rating on Rational.

Rational hadn't given any reason to worry about earnings estimates, SG Cowen analyst Rehan Syed said in a research note released ahead of the third quarter repot.

"Management was particularly confident going into their quiet period and our sources suggest followed through with a strong close to the quarter," Syed wrote. "We believe the strong execution prowess of this company would have sailed past some of IT spending disruption evident in smaller companies in this space."

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