The global interconnection and data center company, Equinix Inc. (EQIX - Free Report) is set to report first-quarter 2015 results on Apr 29. Last quarter, the company posted a negative earnings surprise of 42.86%. Further, it is worth noting that Equinix has outperformed twice and missed the Zacks Consensus Estimate the other two times over the last four quarters with an average negative earnings surprise of 8.99%.
Let us see how things are shaping up for this announcement.
Factors at Play
Although the company’s recurring revenue model, global expansion of data centers and conversion into an REIT are encouraging, we remain slightly cautious about the huge capital outlays which may negatively impact first-quarter profitability. Moreover, rising competition from other established Internet data center operators such as AT&T (T - Free Report) , Level 3 Communications, COLT and Verizon will affect product pricing, thereby reducing the company’s margins.
Additionally, the telecommunications industry is currently undergoing consolidation. As customers combine businesses, the requirement for co-location space will decline thereby affecting Equinix’s overall growth prospects.
Our proven model does not conclusively show that Equinix will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: ESP for Equinix is 0.00%. This is because the Most Accurate estimate stands at earnings of 85 cents per share, in line with the Zacks Consensus Estimate.
Zacks Rank: Equinix carries a Zacks Rank #4 (Sell).
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
VASCO Data Security International Inc. , with an Earnings ESP of +11.11% and a Zacks Rank #3 (Hold).
FireEye Inc. (FEYE - Free Report) , with an Earnings ESP of +6.25% and a Zacks Rank #3.