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Equinix (EQIX) Up 1.5% Since Earnings Report: Can It Continue?

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More than a month has gone by since the last earnings report for Equinix, Inc. (EQIX - Free Report) . Shares have added about 1.5% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Equinix Beats on Q2 AFFO & Revenues, Raises FY17 View

Equinix posted better-than-expected second-quarter 2017 results, wherein both the top line and bottom line surpassed the Zacks Consensus Estimate and increased from the year-ago quarter.

The company’s adjusted funds from operations (AFFO) increased from $4.13 per share reported in the year-ago quarter to $4.59 per share, surpassing the Zacks Consensus Estimate of $3.41. The increase can mainly be attributable to robust top-line growth, strong operating performance and lower tax rate, partially offset by higher cost of revenues and share count.

AFFO is a non-GAAP financial measure generally used in the Real Estate Investment Trust (REIT) industry.

Quarter in Detail

Total revenue was $1.066 million, up 18% from the year-ago quarter, beating the Zacks Consensus Estimate of $1.025 billion. This marked the 58th quarter of consecutive revenue growth. The year-over-year improvement was primarily driven by strong booking activity, Equinix's global platform, continued enterprise momentum and the acquisition of 29 Verizon data centers.

Equinix continues to witness strong demand for cloud services from corporations interested in enhancing their networks. The company witnessed revenue growth across all three geographic regions and verticals. Robust growth in the global Colocation and Interconnection platforms gave a boost to the top line.

Moreover, solid performance in MRR (monthly recurring revenues) per cabinet, MRR churn rate (2.4%) and cross connect additions drove the top line. Recurring revenues came in at $1.010 billion (95% of total revenue), up approximately 18.6% from the year-ago quarter. Non-recurring revenues climbed 14.6% to $56.4 million (5% of total revenue).

Revenues from the three geographic regions increased on a year-over-year basis too. Revenues from the Americas, EMEA and Asia-Pacific were up 29.1%, 7.4% and 12.6% to $533.6 million, $322.9 million and $209.9 million, respectively.

Gross margin was 68% flat on a year-over-year basis, primarily due to increased cost of revenues as a percentage of sales. Total operating expenses increased 12.9% to $212.6 million. Also, operating expenses decreased 100 basis points as a percentage of revenues (bps) to 19.9%.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $509.3 million, up 21.2%. Adjusted EBITDA margins came in at 48% as compared with 47% reported in the year-ago quarter. AFFO increased 23.9% to $360.1 million, during the quarter.

Balance Sheet & Cash Flow

Equinix exited the quarter with cash, cash equivalents and short-term investments of $1.068 billion. The company’s total debt principal outstanding was $9.37 billion as on Jun 30, 2017. It generated cash of $306.5 million from operating activities in the second quarter.

Guidance

Equinix provided third-quarter guidance and raised full-year 2017 projections. For 2017, the company now expects revenues to be in the range of $4.317–$4.327 billion, reflecting an increase of 20% year over year (previous guidance was more than $3.976 million, pointing at an increase of 10.1% year over year). The Zacks Consensus Estimate is pegged at $4.24 billion. The company now predicts adjusted EBITDA to be in the range of $2.038–$2.048 billion (prior guidance was more than $1.860 billion).

Equinix now anticipates full-year 2017 AFFO to be in the range of $1.382–$1.392 billion, reflecting an increase of 29% year over year (previous guidance was more than $1.214, pointing at an increase of 13% year over year).

The company continues to expect cash gross margin for full-year 2017 to be approximately between 67% and 68%. Cash selling, general and administrative (SG&A) expenses are now projected in the range of $868–$878 million (previous guidance was $810–$830 million).

For the third quarter, Equinix expects revenues in the range of $1.133–$1.141 billion (mid-point $1.137 billion). The Zacks Consensus Estimate of $1.11 billion. Adjusted EBITDA is likely to be between $535 million and $543 million.

Cash gross margin for second quarter is anticipated to be approximately 67%. Cash selling, general and administrative (SG&A) expenses are projected in the range of $218–$226 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Equinix, Inc. Price and Consensus

 

Equinix, Inc. Price and Consensus | Equinix, Inc. Quote

VGM Scores

At this time, Equinix's stock has a nice Growth Score of B, though it is doing a bit better on the momentum front with A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall,the  stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is more suitable for momentum investors than growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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