Equinix, Inc. (EQIX Quick QuoteEQIX - Free Report) is scheduled to report fourth-quarter and full-year 2022 results on Feb 15 after the market close. The company’s 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 7.51% in terms of adjusted FFO per share. The company’s performance during the quarter reflected steady growth in colocation and inter-connection revenues. It also raised its AFFO per share guidance for 2022.

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 2.53%. This is depicted in the graph below:

Factors at Play

The growing reliance on technology and acceleration in digital transformation strategies by enterprises has led to a rise in demand for data centers, benefiting data center REITs like Equinix.

This is likely to have fueled the demand for the company’s geographically diverse portfolio of International Business Exchanges (IBX) data centers in the fourth 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 lead to a stable cash flow generation for the company in the to-be-reported quarter.

Also, demand for Equinix’s interconnected ecosystem in the fourth 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 $326.4 million, suggesting an increase of 7.8% from the prior-year period’s reported figure.

For fourth-quarter 2022, Equinix projected revenues between $1.848 billion and $1.868 billion. The Zacks Consensus Estimate for the same stands at $1.86 billion, implying a 9.1% improvement from the year-ago period’s $1.71 billion. In addition, EQIX estimated adjusted EBITDA in the range of $821-$841 million for the quarter.

Equinix remained focused on strategic expansion efforts during the quarter under preview to expand its global footprint in IBX data centers.

In October 2022, as part of its efforts to expand in the Asia-Pacific region, EQIX unveiled plans for a $74 million IBX data center in Jakarta to capitalize on the country’s growing digital needs.

In November 2022, embarking upon its second venture into the Association of Southeast Asian Nations (“ASEAN”), the company announced plans to build a new IBX data center in Malaysia’s Nusajaya Tech Park in Iskandar, Johor.

Following the announcement of its plans to expand into Indonesia and Malaysia, Equinix has announced two more expansion endeavors into ASEAN.

Further, in December, it unveiled plans to invest $160 million (U.S. dollars) in a new data center in Johannesburg, South Africa, as part of its efforts to expand in the African continent.

In the same month, Equinix also revealed plans to reduce its overall power use by increasing operating temperature ranges within its data centers. It is the first operator of colocation data centers to introduce such efficiency initiatives.

During the quarter, S&P Global Ratings affirmed its rating of BBB and increased its debt tolerance by one leverage turn, further adding strength to EQIX’s robust balance sheet.

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.

The Zacks Consensus Estimate for fourth-quarter FFO per share has been revised marginally downward over the past month to $6.82. Nonetheless, on a year-over-year basis, it suggests growth of 9.6%.

For 2022, EQIX estimated adjusted FFO per share between $29.10 and $29.32. It expected total revenues of $7.240-$7.260 billion while adjusted EBITDA is projected in the band of $3.352-$3.372 billion.

For the full year, the Zacks Consensus Estimate for FFO per share has been revised marginally upward to $29.25 over the past two months. Moreover, the figure indicates a 7.9% increase from the prior-year period’s tally on revenues of $7.25 billion.

Earnings Whispers

Our proven model does not conclusively predict a surprise in terms of FFO per share for Equinix this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.

Earnings ESP: Equinix has an Earnings ESP of -1.17%. You can uncover the best stocks 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 from the REIT sector, which according to our model, have the right combination of elements to deliver a surprise this reporting cycle:

Digital Realty Trust (DLR Quick QuoteDLR - Free Report) is scheduled to report quarterly figures on Feb 16. DLR currently has an Earnings ESP of +0.99 % and a Zacks Rank of 3.

Park Hotels & Resorts (PK Quick QuotePK - Free Report) is scheduled to report quarterly figures on Feb 22. PK currently has an Earnings ESP of +3.66% and a Zacks Rank of 3.

VICI Properties (VICI Quick QuoteVICI - Free Report) is scheduled to report quarterly figures on Feb 23. VICI currently has an Earnings ESP of +0.29% and a Zacks Rank #2.

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.