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Why Is Equinix (EQIX) Up 19.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Equinix (EQIX). Shares have added about 19.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Equinix due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Equinix’s AFFO & Revenues Surpass Estimates in Q3

Equinix’s third-quarter 2022 adjusted FFO per share of $7.73 surpassed the Zacks Consensus Estimate of $7.19. The figure grew 11.4% from the prior-year quarter’s $6.94.  

EQIX’s results reflected steady growth in colocation and inter-connection revenues. During the third quarter, Equinix’s total inter-connections reached 443,100, rising 1.7% sequentially and 6.9% year over year. It also raised its AFFO per share guidance for 2022.

Total quarterly revenues came in at $1.84 billion, beating the Zacks Consensus Estimate of $1.83 billion. Moreover, the top line improved 9.9% year over year, marking the 79th consecutive quarter of top-line growth.

Per Charles Meyers, president and CEO of the company, “Even in a complex and challenging macro environment, our expansive global reach and robust interconnected ecosystems continue to attract a wide and diverse customer set, as businesses prioritize digital investments and embrace Platform Equinix as a point of nexus to support hybrid and multicloud.”

Quarter in Detail

Recurring revenues were $1.75 billion, up 11.8% from the year-ago quarter. However, non-recurring revenues fell 17.1% to $92.5 million.

Revenues from the three regions increased on a year-over-year basis as well. Revenues from the Americas, EMEA and the Asia Pacific rose 10.9%, 8.5% and 9.7% to $846.2 million, $591.8 million and $402.7 million, respectively.

The adjusted EBITDA came in at $870.9 million, up 10.7% year over year. Adjusted EBITDA margin was reported at 47.3%.

AFFO increased 13.3% year over year to $712 million.

EQIX spent $50.2 million on recurring capital expenditure in the third quarter, up 5.1% on a year-over-year basis. Recurring capital expenditure was 2.7% of revenues in third-quarter 2022. Non-recurring was $503 million, shrinking 20.3% year over year. However, the figure climbed 11.7% sequentially.

Balance Sheet

Equinix had $6.4 billion of available liquidity as of Sep 30, 2022. This comprised cash, cash equivalents and $4 billion of its undrawn revolver and excludes restricted cash and outstanding balance of letters of credit.

Its net leverage ratio was 3.5 and the weighted average maturity was 8.6 years as of Sep 30, 2022.

Guidance

For fourth-quarter 2022, Equinix projects revenues between $1.848 billion and $1.868 billion, implying a 1% increase over the prior quarter. The adjusted EBITDA is expected to be in the range of $821-$841 million.

For the full year, AFFO per share is estimated between $29.10 and $29.32, suggesting a 7-8% increase from the prior year. Earlier, the guided range was $28.77-$29.10.

For 2022, Equinix estimates to generate total revenues of $7.240-$7.260 billion, indicating growth of 9% from 2021. The company expects to incur $20 million of acquisition-related integration costs. Management predicts an adjusted EBITDA of $3.352-$3.372 billion and an adjusted EBITDA margin of 46%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Equinix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Equinix is part of the Zacks REIT and Equity Trust - Retail industry. Over the past month, Simon Property (SPG), a stock from the same industry, has gained 5.7%. The company reported its results for the quarter ended September 2022 more than a month ago.

Simon Property reported revenues of $1.32 billion in the last reported quarter, representing a year-over-year change of +1.5%. EPS of $1.65 for the same period compares with $3.13 a year ago.

Simon Property is expected to post earnings of $3.14 per share for the current quarter, representing a year-over-year change of +1.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.5%.

Simon Property has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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