Equinix Inc.EQIX is set to report first-quarter 2017 results on Apr 26. Last quarter, the company posted a positive earnings surprise of 19.65%. Notably, the stock outperformed the Zacks Consensus Estimate thrice, while it missed the same on one occasion, in the trailing four quarters, resulting in an average positive surprise of 15.83%.
Let's see how things are shaping up for this announcement.
Factors at Play
Equinix is a global provider of network-neutral data centers and Internet exchange services for enterprises, content companies, systems integrators, and network service providers. The company operates across various geographical regions and its increasing popularity among major tech industry players looking for data management should drive revenues in the fourth quarter.
Acquisitions have been a major growth driver for Equinix and helped it to expand data center capacity in many of its key markets since 2003. We expect the company's buyouts of Telecity Group, Bit-isle and Nimbo, to boost the top line in the quarter.
Expansion in important markets and consolidation of facilities in existing ones have been important parts of Equinix's core strategy. We believe that the company's focus on offering upgraded technology to attract clients will bolster its revenues and profitability in the to-be-reported quarter.
However, we remain slightly cautious about the huge capital outlays, which may hurt Equinix's first-quarter profitability. It should be noted that, Equinix had cash, cash equivalents and short-term investments of $751.9 million, while the total debt principal outstanding was $6.82 billion as on Dec 31, 2016. Growing debt burden will affect the company's profitability in the quarter as interest expense would go up.
Moreover, increasing competition from established Internet data center operators, such as AT&T T , Level 3 Communications, COLT and Verizon, will affect product pricing, thereby denting margins.
Equinix, Inc. Price, Consensus and EPS Surprise
Our proven model does not conclusively show that Equinix is likely to beat the Zacks Consensus Estimate in its upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for Equinix is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $3.55 per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Equinix carries a Zacks Rank #3. Though a Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a couple of stocks, which you may consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:
Seagate Technology plc STX , with an Earnings ESP of +3.77%, and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .
Fiserv Inc. FISV , with an Earnings ESP of +0.85% and a Zacks Rank #2.
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