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Equinix (EQIX) Q4 FFO Surpasses Estimates, Revenues Up Y/Y

Zacks Equity Research

Equinix Inc. EQIX posted better-than-expected results for fourth-quarter 2018, wherein the bottom line surpassed the Zacks Consensus Estimate, while revenues came in line with the same. Both adjusted funds from operations (AFFO) and revenues improved year over year as well.

The company’s AFFO per share advanced from $4.82 reported in the year-earlier quarter to $5.13 per share. The Zacks Consensus Estimate was pegged at $4.92. This upside primarily stemmed from robust top-line growth and solid operating performance, partially offset by an elevated cost of revenues.

For full-year 2018, AFFO per share came in at $20.7, surpassing the Zacks Consensus Estimate of $20.5. Further, the reported figure improves nearly 12% from the prior-year tally.

Quarter in Detail

Total revenues came in at $1.31 billion, in line with the Zacks Consensus Estimate, and up 9.2% year over year. Encouragingly, this also marks the 64th quarter of consecutive revenue growth for the company.

Recurring revenues came in at around $1.2 billion, up approximately 9.6% from the year-ago tally. Non-recurring revenues climbed 2.8% to nearly $79.8 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 4.9%, 9% and 19.8% to $638.1 million, $403.1 million and $268.8 million, respectively.

Cash gross margin was 66%, flat year over year. Total operating expenses flared up around 5.7% to $368.4 million year over year.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $617.2 million, up 9.3%. Adjusted EBITDA margins came in at 47% flat year over year. AFFO appreciated 2.9% sequentially to $414 million during the Dec-end quarter.

Balance Sheet

Equinix exited the fourth quarter with cash and cash equivalents of nearly $606.2 million. The company’s total debt principal outstanding was $11.4 billion as of Dec 31, 2018.

Dividend Update

Concurrent with its fourth-quarter earnings release, on Feb 13, Equinix’s board of directors approved a quarterly cash dividend of $2.46 per share. The dividend will be paid on Mar 20, to shareholders of record on Feb 27, 2019.

Guidance

Equinix has provided an outlook for the first quarter and full-year 2019.

For 2019, the company estimates generating revenues of $5.520-$5.570 billion, reflecting an increase of 9-10% year over year. The company predicts adjusted EBITDA of $2.605-$2.655 billion. Equinix anticipates full-year 2019 AFFO to be in the $1.825-$1.875 billion range.

Coming to the current quarter, Equinix projects revenues of $1.342-$1.352 billion. Adjusted EBITDA is likely to lie between $624 million and $634 million.

Our Take

At fourth-quarter end, Equnix had 36 expansion projects underway and it set foot in three new markets — Hamburg, Muscat and Seoul. Further, the company witnessed record high global gross and net bookings during the quarter.

Nevertheless, rising debt burden and intensifying competition from established Internet data-center operators remain growth hurdles for Equinix.

Equinix, Inc. Price, Consensus and EPS Surprise
 

Equinix, Inc. Price, Consensus and EPS Surprise | Equinix, Inc. Quote

Equinix carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Ventas, Inc. VTR reported fourth-quarter 2018 normalized FFO of 96 cents, beating the Zacks Consensus Estimate of 95 cents. However, the figure came in lower than the year-ago tally of $1.03.

Alexandria Real Estate Equities, Inc. ARE recorded fourth-quarter 2018 adjusted FFO of $1.68 per share, missing the Zacks Consensus Estimate by a whisker.

Boston Properties Inc.’s BXP fourth-quarter 2018 FFO per share of $1.59 also missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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