A month has gone by since the last earnings report for Equinix, Inc.EQIX . Shares have lost about 5.4% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is EQIX 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 drivers.
Equinix Surpasses AFFO and Revenue Estimates in Q1
Equinix posted better-than-expected first-quarter 2018 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and increased from the year-ago quarter.
The company's adjusted funds from operations (AFFO) advanced to $5.21 per share from $4.15 per share reported in the year-ago quarter. The Zacks Consensus Estimate was pegged at $4.94. 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 $1.22 billion, up 28% from the year-ago quarter, beating the Zacks Consensus Estimate of $1.21 billion. This marked the 61st quarter of consecutive revenue growth.
Equinix continues to witness solid demand for cloud services from corporations interested in enhancing firms' networks. The company experienced revenue growth across all three geographic regions and verticals. Robust growth in the global Colocation and Interconnection platforms provided a boost to the top line.
Moreover, solid performance in MRR (monthly recurring revenues) per cabinet, MRR churn rate (2.4%) and cross-connect additions drove the top line. Recurring revenues came in at $1.15 billion (95% of total revenues), up approximately 28% from the year-ago quarter. Non-recurring revenues climbed 27.7% to $65.2 million (5% of total revenues).
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 38.1%, 20.6% and 17.9% to $602.6 million, $379.6 million and $233.6 million, respectively.
Total operating expenses flared up 17.3% to $367.6 million. Gross margin was 48.8%, down from 50.6% reported in the year-ago quarter, primarily due to elevated cost of revenues as a percentage of sales.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $579.5 million, up 35.5% year-over-year. Adjusted EBITDA margins came in at 48% as compared with 45% reported in the year-ago quarter. AFFO increased 36.3% on a year-over-year basis to $414.6 million during the reported quarter.
Balance Sheet & Cash Flow
Equinix exited the first quarter with cash, cash equivalents and short-term investments of $2.1 billion. The company's total debt principal outstanding was $11.2 billion as of Mar 31, 2018. It generated cash of $300.9 million from operating activities in first-quarter 2018.
Equinix provided an outlook for the second quarter and raised a few full-year 2018 projections. For 2018, the company now anticipates revenues to be in the range of $5.082-$5.122 billion (prior guidance was over $5.010 billion), reflecting an increase of 17% year over year.
Adjusted EBITDA is expected to be in the range of $2.395-$2.435 billion (prior guidance was over $2.385 billion).
Equinix now anticipates full-year 2018 AFFO to be in the range of $1.595- $1.635 billion, reflecting growth of 12% year over year. Earlier, Equinix expected AFFO to exceed $1.635 billion.
The company reiterated its expectation of the cash gross margin for the full year and expects it to be approximately 67%. Cash selling, general and administrative (SG&A) expenses are projected to be 19-20% of revenues.
For second-quarter 2018, Equinix expects revenues in the range of $1.257-$1.267 billion. Adjusted EBITDA is likely to lie between $579 million and $589 million.
Cash gross margin for the second quarter is anticipated to be 66-67%. Cash selling, general and administrative (SG&A) expenses are projected to be in the range of 19-20% of revenues.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to four lower.
Equinix, Inc. Price and Consensus
Equinix, Inc. Price and Consensus | Equinix, Inc. Quote
At this time, EQIX has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. The stock was also 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.
The company's stock is suitable solely for growth based on our styles scores.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, EQIX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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