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What's in the Cards for Equinix (EQIX) This Earnings Season?

Zacks Equity Research

Equinix, Inc. EQIX is set to report first-quarter 2019 earnings results on May 1, after the market closes. The company’s results will likely reflect year-over-year growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this global connectivity leader delivered a positive surprise of 4.27% in terms of adjusted FFO per share. This was supported by robust top-line growth and solid operating performance.

The company witnessed a remarkable streak of beating earnings estimates, especially when looking at the previous four quarters. In fact, Equinix surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average positive beat being 4.27%.

Equinix, Inc. Price and EPS Surprise
 


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

Let’s see how things are shaping up prior to this announcement.

Factors at Play

A study by Equinix indicated that the Interconnection Bandwidth capacity — a measurement of direct and private data exchange between businesses — is expected to witness a compound annual growth rate (CAGR) of 51% from 2017 to 2021 in Asia-Pacific. This will account for more than 27% of global Interconnection Bandwidth.

Amid this, Equinix continues expanding its international footprint in strategic markets and strengthen the company’s global inter-connection platform.

In January, the company announced a new IBX data center in Seoul, South Korea, and concluded the acquisition of a commercial building in Hamburg, Germany, for $11 million. Further, it plans to invest an additional $25 million to redevelop the 130,000-square-foot-property into a facility that will be renamed to Equinix HH1 International Business Exchange (IBX) data center.

These acquisitions will likely enable the company to generate higher revenues in these markets. In fact, the Zacks Consensus Estimate for geographic revenues from Asia-Pacific is pegged at $280 million and indicates a year-over-year increase of around 20%. Likewise, revenues from Europe are expected to be up 10.8% year over year to $421 million.

Moreover, the company’s focus to expand its footprint in a disciplined and balanced manner along with an improving leverage level enabled it to witness a rating upgrade to "BBB-" by S&P Global Ratings.

Equinix projects revenues at $1.342-$1.352 billion for the March-end quarter. The Zacks Consensus Estimate for the same is pegged at $1.35 billion.

Also, prior to the first-quarter earnings release, the company has been witnessing upward estimate revisions. As such, the Zacks Consensus Estimate of FFO per share for the quarter under review has been revised marginally upward to $5.60 over the past month, reflecting analysts’ bullish sentiments. Also, it represents year-over-year growth of 7.5%.

However, fierce competition from established Internet data-center operators and hyperscale providers might depress the company’s margins and revenues. In fact, the weighted average price per cabinet (MMR per cabinet) in Asia-Pacific is expected to be $1,859, down 9.4% year over year.

Earnings Whispers

Our proven model does not conclusively show that Equinix is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Equinix has an Earnings ESP of -2.48%

Zacks Rank: Equinix carries a Zacks Rank of 3, currently.

Stocks That Warrant a Look

While the other players in this space are lined up to report their financial results, below are three stocks, poised to beat on earnings per the proven Zacks model. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alexandria Real Estate Equities, Inc. ARE, scheduled to release earnings on Apr 29, has an Earnings ESP of +0.3% and currently carries a Zacks Rank of 2.

Mack-Cali Realty Corporation CLI, slated to report first-quarter results on May 1, has an Earnings ESP of +1.2% and holds a Zacks Rank of 3, at present.

Welltower, Inc. WELL, scheduled to release earnings on Apr 30, has an Earnings ESP of +0.09% and carries a Zacks Rank of 3, currently.

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

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