Equinix (EQIX) Beats Q3 FFO Estimates, Misses on Revenues

Equinix Inc. EQIX posted mixed results for third-quarter 2019, wherein adjusted funds from operations (AFFO) per share surpassed the Zacks Consensus Estimate, while revenues lagged the same. Nonetheless, both AFFO and revenues improved year over year.

The company’s AFFO per share came in at $5.52, beating the Zacks Consensus Estimate of $5.45. The reported tally included a reduction of 19 cents per share related to higher income tax expense due to FX hedge gains. The figure also improved from the year-ago quarter’s $5.01. This upside primarily stemmed from robust top-line growth and a solid operating performance.

Quarter in Detail

Total revenues came in at $1.4 billion, lagging the Zacks Consensus Estimate of $1.41 billion. Nonetheless, the top-line figure improved 9% year over year. This also marks the 67th quarter of consecutive revenue growth for the company.

Recurring revenues came in at around $1.3 billion, up 9.2% from the year-ago tally. Non-recurring revenues climbed 2% to $77.4 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 jumped 3%, 15% and 12% to $645.2 million, $458.1 million and $293.4 million, respectively.

Cash gross margin was 67%, up 100 basis points year on year. Total operating expenses flared up 13.8% to $407.1 million year over year.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $674.7 million, up 10.2% year over year. Adjusted EBITDA margins came in at 48% flat year over year. AFFO appreciated 17.5% year over year to $472.7 million during the September-end quarter.

Balance Sheet

Equinix exited the third quarter with cash and cash equivalents of $1.4 billion. The company’s total debt principal outstanding was roughly $10.9 billion as of Sep 30, 2019.

Dividend Update

Concurrent with its third-quarter 2019 earnings release, on Oct 30, Equinix’s board of directors approved a quarterly cash dividend of $2.46 per share. The dividend will be paid on Dec 11, to shareholders of record as of Nov 20, 2019.

Guidance

Equinix has updated its outlook for full-year 2019.

For 2019, the company estimates generating revenues of $5.554-$5.564 billion. It predicts adjusted EBITDA of $2.666-$2.676 billion and AFFO in the $1.913-$1.923 billion range. Further, the AFFO per share is estimated to lie between $22.56 and $22.68. The Zacks Consensus Estimate for the same is pegged at $22.78.

Coming to the current quarter, Equinix projects revenues of $1.409-$1.419 billion. Adjusted EBITDA is likely to lie between $654 million and $664 million.

Our Take

Equinix’s decent results were supported by strong performance across all three geographies. Delivering one of the strongest quarters for inter-connection segment in its history, inter-connection revenue growth outpaced colocation growth in the quarter.

Furthermore, it witnessed record channel bookings in the quarter, that accounted for more than 30% of total bookings.

Moreover, at present, the company has 28 major expansion projects under the company, which will boost capacity in 21 markets globally. These organic growth measures bode well.

Equinix, Inc. Price, Consensus and EPS Surprise

Equinix, Inc. Price, Consensus and EPS Surprise

Equinix, Inc. price-consensus-eps-surprise-chart | Equinix, Inc. Quote

Equinix carries a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Highwoods Properties Inc.’s HIW third-quarter FFO per share of 88 cents surpassed the Zacks Consensus Estimate of 85 cents. The reported tally excluded the net impact of 5 cents relating to the company’s market rotation plan. The figure also improved 2.3% year over year.

Boston Properties Inc.’s BXP third-quarter FFO per share of $1.64 surpassed the Zacks Consensus Estimate of $1.62. Nonetheless, the reported tally remained flat year over year.

Ventas, Inc. VTR delivered third-quarter 2019 normalized FFO per share of 96 cents, beating the Zacks Consensus Estimate of 94 cents. However, the figure came in lower than the year-ago tally of 99 cents.

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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