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Equinix (EQIX) Up 4.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Equinix (EQIX). Shares have added about 4.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Equinix due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Equinix Surpasses FFO and Revenue Estimates in Q2

Equinix posted impressive results for second-quarter 2021, wherein adjusted funds from operations (AFFO) per share and revenues both surpassed the Zacks Consensus Estimate and witnessed year-over-year growth.

The company’s quarterly AFFO per share of $7.01exceededthe Zacks Consensus Estimate of $6.72. The figure also improved 10.4% from the year-ago quarter’s $6.35.

This upside primarily stemmed from steady growth in interconnection revenues. During the second quarter, the company added an incremental 7,800 interconnections, bringing the company's total interconnections to more than 406,600.

Quarter in Detail

Total quarterly revenues came in at $1.66 billion, beating the Zacks Consensus Estimate of $1.64 billion. The top line improved 13%, year over year, marking the 74th consecutive quarter of revenue growth.

Recurring revenues were $1.54 billion, up 10.3% from the year-ago quarter’s figure. Non-recurring revenues surged 60.4% from the year-ago quarter to $115.4 million.

Revenues from the three geographic regions increased on a year-over-year basis as well. Revenues from the Americas, EMEA and the Asia Pacific jumped 13.5%, 10.2% and 15.2% to $750.6 million, $537.9 million and $369.3 million, respectively.

Adjusted EBITDA came in at $797 million, up 10.7% year over year.

AFFO climbed 13.3% year over year to $632 million during the June-end quarter.

However, adjusted EBITDA margin was 48%, down from the 49% recorded in the prior-year quarter.

Balance Sheet

Equinix exited the second quarter with cash and cash equivalents of $1.8 billion, up from the $1.6 billion reported at the end of 2020. The company’s total debt principal outstanding was $14 billion as of Jun 30, 2021, up from the $12.5 billion witnessed at the end of 2020.

Guidance

For third-quarter 2021, Equinix projects revenues of $1.668 and $1.688 billion, calling for 1-2% growth, quarter over quarter. Adjusted EBITDA is estimated to lie between $766 million and $786 million.

For the ongoing year, AFFO per share is estimated to be $26.92-$27.36, suggesting a 9-11% year-over-year increase.

Further, Equinix estimates to generate revenues of $6.619-$6.659 billion, indicating growth of 10-11% on a year-over-year basis. Assuming integration costs of $25 million, it predicts adjusted EBITDA of $3.108-$3.148 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Equinix has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Equinix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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