Equinix Beats EPS Est, Revs Grow - Analyst Blog
February 14 2013 - 10:48AM
Zacks
Equinix Inc. (EQIX) reported fourth-quarter
2012 earnings per share of 88 cents, exceeding the Zacks Consensus
Estimate of 68 cents.
Revenues
Total revenues in the reported quarter were $506.5 million, up
20.0% from the year-ago quarter. Revenue from continuing operations
for fiscal 2012 were $1,895.7 million, up 21% year over year. Total
revenues include $34.6 million in revenue from the acquired
companies such as Asia Tone and ancotel, which excludes $29.6
million of revenue from discontinued operations.
This apart, recurring revenue (including
colocation, interconnection and managed services) was $481.7
million during the fourth quarter, up 21% from the year-ago
quarter. Non-recurring revenue was $24.8 million
in the quarter, up 21.8% from $20.3 million reported in the
year-ago quarter.
Operating Results
Gross margin for the quarter was 50.6% versus 47.6% in the
year-ago quarter. The improvement in gross margin took place as
revenue increased at a higher rate than the cost of sales.
Total operating expenses increased 30.2% from the year-ago
quarter. The year-over-year increase in cash operating expenses was
primarily attributed to higher selling and marketing expenses (up
23.4%) and general and administrative expenses (up 21.4%).
Operating income of $102.0 million increased 23.9% from $82.3
million reported in the year-ago quarter.
Net income attributable to Equinix stood at $44.8 million or 88
cents per share versus $17.8 million or 35 cents per share in the
year-ago quarter.
Balance Sheet, Cash Flow & Capital
Expenditure
The company generated cash from operating activities of $209.1
million in the fourth quarter compared with $102.2 million in the
previous quarter. Cash, cash equivalents and short-term investments
were $418.7 million versus $404.5 million in the earlier
quarter.
Capital expenditures in the quarter were $210.4 million, of
which $166.9 million was attributed to expansion capital
expenditures, while $43.5 million was attributed to the ongoing
capital expenditures.
Guidance
Again, for the first quarter of 2013, revenue is expected in the
range of $518.0 to $522.0 million, while cash gross profit margin
is expected between 68% and 69%. Capital expenditures are expected
between $140.0 to $160.0 million including approximately $40.0
million of ongoing capital expenditures and $100.0 to $120.0
million of expansion capital expenditures.
For the full year 2013, total revenues are expected exceed
$2,200.0 million. Full year cash gross margins are expected between
68% and 69%. While the cash selling, general and administrative
expenses are expected between $490.0 and $510.0 million. Moreover,
the company projected capital expenditures for 2013 in the range of
$550.0 to $650.0 million, including $165.0 million of ongoing
capital expenditures and $385.0 to $485.0 million of expansion
capital expenditures.
Our Take
The company’s fourth-quarter results were modest with both
revenue and bottom line matching our expectation. Total revenues
improved on a year-over-year basis as a result of good contribution
from the acquired companies.
This apart, the company has a decent cash balance increasing
sequentially. Equinix is also experiencing improvement in business
fundamentals across most of its business segments, while the
capital expenditure fund reflects the company’s future growth
prospects.
On the other hand, the company must work to reduce its debt
level. In spite of all the positives, competitive threats from the
likes of AT&T Inc. (T) raise our apprehension.
European exposure and industry consolidation are the other
headwinds.
Investors can consider other stocks such as ACME Packet
Inc.(ACME), and Arris Group Inc. (ARRS)
and CA Technologies (CA). While both ACME and
Arris carry a Zacks Rank #1 (Strong Buy), CA carries a Zacks Rank
#2 (Buy). Equinix carries a Zacks Rank #2 (Buy).
(ACME): ETF Research Reports
ARRIS GROUP INC (ARRS): Free Stock Analysis Report
CA INC (CA): Free Stock Analysis Report
EQUINIX INC (EQIX): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
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