It has been about a month since the last earnings report for Equinix (EQIX - Free Report) . Shares have lost about 0.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Equinix due for a breakout? 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 Q3 AFFO & Revenues, Updates '18 View
Equinix 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 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.
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 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. Adjusted EBITDA is likely to lie between $604 million and $614 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
Currently, Equinix has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Equinix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.