Yahoo Finance Is a Beat in Store for Equinix (EQIX) This Earnings Season?
Equinix, Inc. EQIX is scheduled to report first-quarter 2023 results on May 3, after 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 3.96% 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 increased its dividend payment by 10% on solid operating performance.
Over the preceding four quarters, EQIX’s FFO per share surpassed estimates on three occasions and missed once, the average being 3.72%. This is depicted in the graph below:
Equinix, Inc. Price, Consensus and EPS Surprise
Equinix, Inc. price-consensus-eps-surprise-chart | Equinix, Inc. Quote
Factors at Play
Data center infrastructure demand has remained robust amid growth in cloud computing, the Internet of Things and Big Data, and elevated demand for third-party IT infrastructure. Moreover, the growth in the AI, autonomous vehicles and virtual/augmented reality markets has created a solid base for data centers.
Amid this, Equinix is expected to have capitalized on enterprises’ growing reliance on technology and acceleration in digital transformation strategies. This is likely to have driven the demand for its geographically diverse portfolio of International Business Exchanges (IBX) data centers, benefiting its first-quarter earnings.
Moreover, the company’s recurring revenue model, which comprises colocation, related interconnection and managed IT infrastructure services, is expected to have led to stable cash flow generation in the to-be-reported quarter, boosting its top line.
Also, given the acceleration in enterprise cloud adoption and increasing cloud or Internet customers’ requirements for highly interconnected data center space, the demand for Equinix’s interconnected ecosystem in the first quarter is likely to have remained robust.
The Zacks Consensus Estimate for interconnection revenues is pegged at $343.03 million, suggesting growth of 10.9% from the prior-year period’s reported figure.
For first-quarter 2023, Equinix projected revenues between $1.965 billion and $1.995 billion. The Zacks Consensus Estimate for the same stands at $1.98 billion, implying a 13.9% increase from the year-ago period’s $1.73 billion. We estimate the same to be $1.979 billion, suggesting a 14.1% year-over-year rise.
In addition, EQIX estimated adjusted EBITDA in the range of $891-$921 million for the quarter. Our estimate is pegged at $901 million, implying an increase of 12.7%.
We expect Equinix to have maintained a robust balance sheet position during the to-be-reported quarter, which might have supported its acquisitions and development activities.
However, higher interest expenses and adverse foreign currency fluctuations are expected to have cast a pall on its quarterly performance. Our estimate for 2023 interest expenses implies a year-over-year increase of 6.8%.
The Zacks Consensus Estimate for first-quarter FFO per share has been revised marginally downward over the past month to $7.92. Nonetheless, on a year-over-year basis, it suggests growth of 10.6%.
Q1 Developments
This March, Equinix announced that Oxford Quantum Circuits (“OQC”) aims to make one of the most powerful quantum computers commercially available to businesses worldwide through Equinix's TY11 IBX data center. OQC is a leading global Quantum Computing as a Service (QCaaS) company.
The move is expected to benefit businesses with the ease of access to quantum computing, making Equinix’s latest move a strategic fit.
Further, in February, EQIX unveiled that it is building its second data center in Barcelona, a vital subsea hub. The new BA2 data center will serve as a strategic connection point for data communications between Europe, Africa and the Middle East, making EQIX’s move seem prudent.
In the same month, Equinix announced the addition of five new long-term Power Purchase Agreements (PPAs) in Spain, aggregating 225 megawatts (MW). The move considerably increased the company’s backing of renewable power projects.
Earnings Whispers
Our proven model predicts 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. That’s the case here.
Earnings ESP: Equinix has an Earnings ESP of +0.44%. 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.
Other Stocks That Warrant a Look
Here are some other stocks from the REIT sector, which according to our model, have the right combination of elements to deliver a surprise this reporting cycle:
Realty Income O is scheduled to report quarterly figures on May 3. O currently has an Earnings ESP of +0.12% and a Zacks Rank # 3.
Federal Realty Investment Trust FRT is scheduled to report quarterly figures on May 4. FRT has an Earnings ESP of +0.57% and a Zacks Rank of 3 currently.
Americold Realty Trust COLD is scheduled to report quarterly figures on May 4. COLD currently has an Earnings ESP of +17.72% and a Zacks Rank #2 (Buy).
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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Equinix, Inc. (EQIX) : Free Stock Analysis Report
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Americold Realty Trust Inc. (COLD) : Free Stock Analysis Report
