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What's in Store for Equinix (EQIX) Stock in Q1 Earnings?

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Equinix, Inc. (EQIX - Free Report) is set to report first-quarter 2018 earnings results on May 2, after the market closes. The company’s funds from operations (FFO) per share and revenues are anticipated to rise year over year.

In the last reported quarter, Equinix delivered a positive surprise of 5.4% in terms of FFO per share. Results were primarily driven by strong booking activities, global expansions, continued enterprise momentum and synergies from acquisitions.

The company witnessed a remarkable streak of beating earnings estimates, especially when looking at the previous four reports. In fact, Equinix surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive earnings surprise of 6.4%.

Equinix, Inc. Price and EPS Surprise

 

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

Factors at Play

Equinix is a global provider of network-neutral data centers and internet-exchange services for enterprises, content companies, systems integrators and network service providers. The company operates across various geographical regions and its increasing popularity among major tech-industry players, those are looking for data management, is likely to drive revenues in the first quarter.

Acquisitions have been major growth driver for Equinix and helped it expand data-center capacity in many of its key markets since 2003. We anticipate that the company’s buyouts of data-center assets from Verizon Communications Inc. (VZ - Free Report) , Telecity Group, Bit-isle and Nimbo to boost the top line in the quarter under review.

Expansion in major markets and consolidation of facilities in existing ones are important parts of Equinix's core strategy. We believe that the company’s focus on offering upgraded technology to attract clients will bolster revenues and profitability in the to-be-reported quarter.

Amid these, the Zacks Consensus Estimate for its revenue is pegged at $1.21 billion for the quarter under review, reflecting projected growth of 27.6% from the year-ago period.

However, we remain slightly cautious about the huge capital outlays, which might dent Equinix’s first-quarter profitability. It should be noted that at the end of fourth-quarter 2017, Equinix had cash, cash equivalents and short-term investments of $1.441 billion while the total debt principal outstanding was $10.17 billion as of Dec 31, 2017. Growing debt burden will affect the company’s profitability in the quarter under review as interest expenses would flare up.

Moreover, heightening competition from established internet data-center operators such as AT&T (T - Free Report) , Level 3 Communications, COLT and Verizon will affect product pricing, thereby, thwarting the company’s margins.
The company’s activities during the first quarter could not gain adequate confidence from the analysts. Consequently, the Zacks Consensus Estimate for FFO per share of $4.94 for the first quarter remained unchanged over the past month. Nonetheless, the figure witnessed rise of 19.3% from the prior-year quarter.

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 bullish 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.

Zacks ESP: Equinix has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $4.94.

Zacks Rank: Equinix’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident about a positive surprise.

Stock With Favorable Combination

Here is a company that you may want to consider as our model shows that this stock has the right combination of elements to post an earnings beat:
Amanda Hoffer Properties (AHH - Free Report) , slated to release first-quarter results on May 1, has an Earnings ESP of +0.88% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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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