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Equinix (EQIX) to Post Q3 Earnings: What's in the Offing?

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Equinix, Inc. (EQIX - Free Report) is scheduled to report third-quarter 2022 results on Nov 2 after market close. Its quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.

In the previous quarter, Equinix reported a surprise of 3.84% in terms of adjusted FFO per share. Its performance during the quarter reflected steady growth in colocation and inter-connection revenues.

Over the preceding four quarters, EQIX’s FFO per share surpassed estimates on two occasions and missed the same on the other two, the average being 1.59%. This is depicted in the graph below:

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

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

Factors at Play

The demand in top-tier data center markets has been robust despite a high occupancy level. This has led to faster absorption of new construction, benefiting data center REITs like Equinix.

There is growing reliance on technology and acceleration in digital transformation strategies by enterprises which calls for Big Data exchanges. This is likely to have fueled the demand for Equinix’s geographically diverse portfolio of International Business Exchanges (IBX) data centers in the third quarter.

EQIX has a recurring revenue model that comprises colocation, related interconnection and managed IT infrastructure services. The customers are billed at fixed rates on a recurring basis through the life of the respective contracts. This is expected to have supported stable cashflows for the company in the to-be-reported quarter.

Also, demand for Equinix’s interconnected ecosystem in the third quarter is expected to have remained strong, driven by an acceleration in enterprise cloud adoption and increasing cloud or Internet customers’ requirements for highly interconnected data center space.

The Zacks Consensus Estimate for interconnection revenues is pegged at $322 million, suggesting an increase of 10.6% from the prior-year period’s reported figure.

The Zacks Consensus Estimate for revenues stands at $1.83 billion, suggesting a 9.5% improvement from the year-ago period’s reported number.

For third-quarter 2022, Equinix projected revenues between $1.827 billion and $1.847 billion, a 1-2% increase over the prior quarter. The company estimated adjusted EBITDA between $831 million and $851 million.

Equinix’s strong balance sheet is expected to have supported its acquisitions and development activities during the quarter.   

In August 2022, Equinix and Orange entered into a partnership to expand the latter’s Telco Cloud footprint by using the former’s Bare Metal as a Service capability, known as Equinix Metal. This collaboration will help accelerate the deployment of Orange's New Generation International Network.  

However, Equinix faces intense competition from existing and new players in the space, given the strong growth potential of the industry. The competition could have prompted competitors to resort to aggressive pricing policies, adversely impacting EQIX’s pricing power.

Also, as a major part of the company’s business lies outside the United States, the strengthening of the U.S. dollar might have been a headwind during the quarter.

Equinix’s activities during the third quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the FFO per share has been revised nearly 1% downward over the past month to $7.19. Nonetheless, on a year-over-year basis, it suggests growth of 3.6%.

Earnings Whispers

Equinix does not have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of a beat.

Earnings ESP: Equinix has an Earnings ESP of -1.39%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: EQIX currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:

Public Storage (PSA - Free Report) is slated to report quarterly numbers on Nov 1. PSA has an Earnings ESP of +1.34% and carries a Zacks Rank of 3.

Extra Space Storage (EXR - Free Report) is scheduled to report quarterly figures on Nov 1. EXR has an Earnings ESP of +1.31% and a Zacks Rank of 3 presently.

Host Hotels & Resorts (HST - Free Report) is scheduled to report quarterly figures on Nov 2. HST has an Earnings ESP of +0.71% and a Zacks Rank of 3 currently.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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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