Technology

Equinix (EQIX) Up 1.5% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Equinix (EQIX). Shares have added about 1.5% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Equinix Beats FFO & Revenues Estimates in Q2, Ups View

Equinix posted strong results for second-quarter 2020, wherein adjusted funds from operations (AFFO) per share and revenues surpassed the Zacks Consensus Estimate and improved year over year.

The company’s quarterly AFFO per share was $6.35, beating the Zacks Consensus Estimate of $5.98. The figure also improved 13% from the year-ago quarter’s $5.87.

The upside primarily stemmed from steady growth in interconnection revenues. Nonetheless, $2 million in integration costs hurt AFFO and adjusted EBITDA.

Quarter in Detail

Total quarterly revenues were $1.47 billion, surpassing the Zacks Consensus Estimate of $1.46 billion. Also, the top-line figure improved 6% year over year, representing the 70th consecutive quarter of revenue growth.

Recurring revenues were $1.38 billion, up 7% from the year-ago quarter’s figure. Non-recurring revenues declined 8.8% from the year-ago quarter to $71.9 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%, 8% and 10% to $661.4 million, $488.1 million and $320.6 million, respectively.

Cash gross margin was 67%, stable year over year. Total operating expenses were up 13.5% year over year to $448.3 million.

Adjusted EBITDA was $720 million, up 6% year over year. Adjusted EBITDA margins were 49%, stable year over year. AFFO appreciated 12% year over year to $558 million in the June-end quarter.

Balance Sheet

Equinix exited the second quarter with cash and cash equivalents of $4.78 billion. The company’s total debt principal outstanding was $14.19 billion as of Jun 30, 2020.

Guidance

The company improved its guidance for the ongoing year on foreign currency benefit. For 2020, it estimates generating revenues of $5.919-$5.989 billion as compared with $5.877-$5.985 billion mentioned earlier. It predicts adjusted EBITDA of $2.781-$2.851 billion, higher than $2.765-$2.845 billion stated earlier.

Moreover, AFFO is expected to be $2.107-$2.177 billion as compared with $2.043-$2.133 billion mentioned previously. Further, AFFO per share is estimated to be $23.87-$24.67, up from $23.62-$24.66 stated earlier.

For third-quarter 2020, Equinix projects revenues of $1.493-$1.513 billion. Adjusted EBITDA is likely to be between $696 million and $716 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Equinix has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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 trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Equinix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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