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Equinix's (EQIX) Q2 FFO Surpasses, Revenues Lag Estimates

Zacks Equity Research

Equinix Inc. EQIX posted mixed results for second-quarter 2019, wherein the bottom line surpassed the Zacks Consensus Estimate, while revenues lagged the same. Nonetheless, both adjusted funds from operations (AFFO) and revenues improved year over year.

The company’s AFFO per share came in at $5.87, beating the Zacks Consensus Estimate of $5.57. The figure also improved from the year-ago quarter’s $5.37. This upside primarily stemmed from robust top-line growth and a solid operating performance.

Quarter in Detail

Total revenues came in at $1.38 billion, lagging the Zacks Consensus Estimate of $1.39 billion. Nonetheless, the top-line figure improved 9.5% year over year. Encouragingly, this also marks the 66th quarter of consecutive revenue growth for the company.

Recurring revenues came in at around $1.3 billion, up approximately 10.2% from the year-ago tally. Non-recurring revenues climbed 6.3% to nearly $78.9 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%, 17% and 12% to $644 million, $450 million and $291 million, respectively.

Cash gross margin was 67%, flat year on year. Total operating expenses marginally declined to $395 million year over year.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $677 million, up 12% year over year. Adjusted EBITDA margins came in at 49% as compared to the prior-year quarter’s 48%. AFFO appreciated 16% sequentially to $489 million during the June-end quarter.

Balance Sheet

Equinix exited the second quarter with cash and cash equivalents of roughly $1.6 billion. The company’s total debt principal outstanding was $10.9 billion as of Jun 30, 2019.

Dividend Update

Concurrent with its second-quarter 2019 earnings release, on Jul 31, Equinix’s board of directors approved a quarterly cash dividend of $2.46 per share. The dividend will be paid on Sep 18, to shareholders of record as of Aug 21, 2019.

Guidance

Equinix updated its outlook for full-year 2019.

For 2019, the company estimates generating revenues of $5.565-$5.595 billion.This indicates a $10-million increase at the mid-point as compared with the prior guidance. The company predicts adjusted EBITDA of $2.660-$2.690 billion, a $15-million increase at the mid-point as compared with the previously-issued outlook. Equinix anticipates full-year 2019 AFFO in the $1.910-$1.930 billion range, up $25 million at the mid-point from the prior projection. 

Coming to the current quarter, Equinix projects revenues of $1.399-$1.409 billion. Adjusted EBITDA is likely to lie between $665 million and $675 million.

Bottom Line

Equinix’s stellar results highlight the company’s robust operating platform. Additionally, the company’s continued growth in revenues for the last 66 quarters is impressive. Additionally, customer deployments across multiple regions soared to 73% of total recurring revenues. This indicates the underlying value of Equinix’s global platform.

Equinix, Inc. Price, Consensus and EPS Surprise

Equinix, Inc. Price, Consensus and EPS Surprise

Equinix, Inc. price-consensus-eps-surprise-chart | Equinix, Inc. Quote

Equinix carries a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Cousins Properties Incorporated CUZ reported second-quarter FFO per share (before TIER transaction costs) of 71 cents, missing the Zacks Consensus Estimate by a whisker. Nonetheless, the figure came in higher than the prior-year quarter’s reported tally of 60 cents.

SL Green Realty Corp. SLG delivered second-quarter 2019 FFO of $1.82 per share, surpassing the Zacks Consensus Estimate of $1.73. The tally includes promote income from the sale of 521 Fifth Avenue of $3.4 million or 4 cents per share. Results also compared favorably with the year-ago quarter’s tally of $1.69.

Crown Castle International Corp. CCI posted second-quarter adjusted AFFO per share of $1.48, up from the prior-year figure of $1.31. Furthermore, the reported figure outpaced the Zacks Consensus Estimate of $1.43.

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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