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Equinix (EQIX) Beats on Q3 AFFO & Revenues, Updates '18 View

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Equinix Inc. (EQIX - Free Report) posted better-than-expected results for third-quarter 2018, wherein the top and bottom lines surpassed the Zacks Consensus Estimate, and improved from the year-ago quarter as well.

The company’s adjusted funds from operations (AFFO) advanced from $4.97 per share reported in the year-earlier quarter to $5.01 per share. The Zacks Consensus Estimate was pegged at $4.95. The uptick primarily stemmed from robust top-line growth and strong operating performance, partially offset by an elevated cost of revenues.

Quarter in Detail

Total revenues came in at $1.28 billion, up 11.3% from the prior-year quarter, and beating the Zacks Consensus Estimate of $1.27 billion. Encouragingly, this also marks the 63rd quarter of consecutive revenue growth.

Recurring revenues came in at around $1.21 billion, up approximately 10.8% from the year-ago tally. Non-recurring revenues climbed 19.6% to $75.9 million.

Revenues from the three geographic regions increased on a year-over-year basis as well. Revenues from the Americas, EMEA and the Asia Pacific were up 4.9%, 17% and 20.4% to $625.7 million, $396.7 million and $261.3 million, respectively.

Gross margin was 48.6%, marginally down from 49.4% reported in the comparable period last year, primarily due to elevated cost of revenues as a percentage of sales. Total operating expenses flared up around 3.7% to $357.7 million year over year. Nonetheless, operating expenses shrunk 340 basis points (bps) as a percentage of revenues to 27.9%.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $613 million, up 11.4%. Adjusted EBITDA margins came in at 48% flat year over year. AFFO depreciated 6% sequentially to $402 million during the Sep-end quarter.

Balance Sheet & Cash Flow

Equinix exited the third quarter with cash and cash equivalents of nearly $870.5 million. The company’s total debt principal outstanding was $11.4 billion as of Sep 30, 2018. It generated cash of nearly $417.2 million from operating activities in the quarter under review.

Dividend Update

Concurrent with its third-quarter earnings release, on Nov 1, Equinix’s board of directors approved a quarterly cash dividend of $2.28 per share. The dividend will be paid on Dec 12, to shareholders of record on Nov 14, 2018.

Guidance

Equinix provided an outlook for the fourth quarter and revised a few full-year 2018 projections.

For 2018, the company now anticipates revenues of $5.060-$5.070 billion (prior guidance was $5.037-$5.077 billion), reflecting an increase of 16% year over year. The Zacks Consensus Estimate is pegged at $5.06 billion.

The company now predicts adjusted EBITDA of $2.4-$2.41 billion (prior guidance was $2.379-$2.419 billion).

Equinix anticipates full-year 2018 AFFO to be in the $1.619-$1.639 billion band. Earlier, the AFFO figure was estimated between $1.596 and $1.636 billion.

Coming to the current quarter, Equinix projects revenues in the range of $1.299-$1.309 billion. The Zacks Consensus Estimate is pinned at $1.28 billion. Adjusted EBITDA is likely to lie between $604 million and $614 million.

Our Take

During the third quarter, Equnix completed nine expansion projects across eight markets. Further, it recorded high bookings in the content and digital media vertical. Also, the enterprise vertical continues to be the fastest growing one, along with the manufacturing, healthcare and travel sub-segments in the quarter under review.

Nevertheless, rising debt burden and intensifying competition from established Internet data-center operators remain growth hurdles for Equinix.

Equinix, Inc. Price, Consensus and EPS Surprise
 


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

Equinix carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We, now, look forward to the earnings releases of Lamar Advertising Company (LAMR - Free Report) , Jones Lang LaSalle Incorporated (JLL - Free Report) and Outfront Media Inc. (OUT - Free Report) , all of which are scheduled to report their quarterly numbers next week.

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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