Equinix Inc.
(
EQIX
) is scheduled to announce its first quarter 2012 results on April
25, 2012 after market close. We see some movement in analysts'
estimates at this point.
Fourth Quarter Overview
Equinix delivered mediocre fourth quarter 2011 earnings of 38
cents a share, falling short of the Zacks Consensus Estimate of 44
cents.
Equinix' revenues in the reported quarter were $431.3 million,
up 24.9% year over year. Revenue growth for the quarter was driven
by improved business activity across all its segments, largely
driven by the strong demand for the Equinix Platform across all
industrial verticals. Market conditions are also improving on the
back of better supply-demand dynamics and firm pricing
environment.
Cash gross margin for the quarter was 66.7% versus 63.7% in the
year-ago quarter. The higher-than-expected results were driven by
higher revenues and a lower-than-planned utility cost.
Adjusted net income for the quarter stood at $18.2 million or 38
cents per diluted share versus $13.7 million or 29 cents per share
in the year-ago quarter.
First Quarter Outlook
For the first quarter of 2012, Equinix expects revenues to be in
the range of $443.0 to $446.0 million. Cash gross margin is
expected in the range of 66.0% to 67.0%. Adjusted EBITDA is
expected to be between $200.0 and $205.0 million.
For full-year 2012, total revenue is expected to exceed $1.87
billion. Cash gross margin is expected to approximate 66%, while
adjusted EBITDA for the year is expected to be greater than $850.0
million.
Agreement of Analysts
Out of the 19 analysts providing estimates for the first quarter
of 2012, one analyst revised the estimate downward over the last 30
days, while one revised it upward. Again, for fiscal 2012, four
analysts revised their estimates downwards over the last 30 days,
and only one moved in the opposite direction.
Moreover, for fiscal 2013, two analysts decreased their
estimates over the last 30 days, while three analysts revised it
upward during the same period.
Some analysts are of the opinion that the company's
collaboration with Cable & Wireless is a win-win situation, as
the latter will use Equinix data centers to serve global enterprise
customers to augment their existing cloud capabilities. This will
in turn help Equinix to improve its customer base, as the company
will have many takers for its cloud computing expertise.
Apart from scheduling a new data center, Equinix also announced
its plans to proceed with the second phase of another local data
center (DC10). The work on the expansion was accelerated upon
sensing the high demand for Equinix's co-location platform in the
region. Washington, D.C. serves as the eastern hub of Internet
traffic exchange in the U.S., and is therefore an important
business area for Equinix.
However, some industry experts believe that the
telecommunications industry is currently facing cut throat
competetion. Moreover, customers are also combining there
businesses, and so they require less co-location space. In
addition, increased utilization of existing co-location space could
reduce the attractive expansion opportunities available to
Equinix.
Magnitude of Estimate Revisions
We have noticed that the Zacks Consensus Estimate for the first
quarter has gone down by six cent to 49 cents in the past 90 days.
On the other hand, the Zacks Consensus Estimate for fiscal 2012 has
declined by 28 cents over the same period. Whereas the Zacks
Consensus Estimate for fiscal 2012 has declined by 3 cents over the
past 90 days to $3.54.
Recommendation
The company has delivered mediocre fourth quarter 2011 results
with EPS falling shy of our expectations. However, the company's
focus on collaboration and good execution are working in its favor,
while consolidation in the telecommunication industry may result in
less collocation space. We believe that further growth in the
client base and strategic acquisitions may result in volume
expansion.
Moreover, the company is making a considerable effort to improve
its cloud computing capabilities. We are also positive about its
recurring revenue model. Despite all the positives, competitive
threats from the likes of
AT&T Inc.
(
T
) and
Verizon Inc.
(
VZ
) makes us cautious. European exposure may also hamper growth going
forward.
Equinix carries a Zacks #3 Rank, implying a short-term Hold
rating.
EQUINIX INC (
EQIX
): Free Stock Analysis Report
AT&T INC (
T
): Free Stock Analysis Report
VERIZON COMM (
VZ
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research