EQIX Equinix Inc

Equinix Inc. (EQIX) is scheduled to announce its first quarter 2011 results on April 27, 2011, after the market closes. We see limited revisions in analyst estimates at this point.

Fourth Quarter Overview

Equinix’ fourth quarter revenue increased 42.0% from the year-ago period on strong demand across international markets, interconnection growth, significant pickup in cross-connects, exchange ports and traffic on switches.

However, net income per share plunged 29.5% year over year to 31 cents. A steep rise in the quarter’s operating expenses due to higher selling and general expenditures was largely responsible for the decline.

Equinix delivered an impressive fourth quarter, beating the Zacks Consensus Estimates both in respect of revenue and earnings per share. The company is increasing its investments in sales and capex as it sees solid demand trends across all geographical regions. We believe that this activity will boost sales in the upcoming quarters.

First Quarter Outlook

The company expects revenues in the range of $354.0 million to $356.0 million. Gross margin is expected to be roughly 64%. Cash selling, general and administrative expenses are projected at $75.0 million. Adjusted EBITDA is expected at between $151.0 million and $153.0 million.

Total capital expenditure, including approximately $25.0 million of ongoing capital expenditures and $160.0 million of expansion capital expenditures, is likely to be approximately $185.0 million.

For full-year 2011, total revenue is expected to be greater than $1.5 billion. Cash selling, general and administrative expenses are estimated at approximately $300.0 million. Adjusted EBITDA is projected to exceed $675.0 million. Capital expenditures for 2011 are expected in the range of $400.0 million to $500.0 million.

Agreement of Analysts

Out of the 22 and 23 analysts providing estimates for the first quarter and fiscal 2011, respectively, none revised any estimate in the past 30 days. There were also no estimate revisions for fiscal 2012.

The limited number of changes to estimates point to the fact that there was no major catalyst during the quarter that could drive results. Consequently, most of the analysts are sticking to the estimates they projected post fourth quarter earnings.

Magnitude of Estimate Revisions

There was no change to the Zacks Consensus Estimates for the first quarter and fiscal 2011 over the past 30 days. However, the first quarter estimate moved down by six cents in the past ninety days to 30 cents. The Zacks Consensus Estimate for fiscal 2011 increased 4 cents over the past ninety days to $2.02.

The Zacks Consensus Estimate for fiscal 2012 witnessed a significant jump of 6 cents to $3.58 since the fourth quarter results. The reason for the uptick is the growing demand for Equinix’ security products. The analysts belive that the data centre space offers a lot of hope based on continued growth of IP and Internet traffic, which Equinix can capitalise.

Recommendation

Equinix is expanding its current facilities and client-base, and is also exercising fiscal discipline. The new data centers were kicked off successfully, especially in Europe, and made a good contribution to overall 2010 revenue growth. We believe that the company has a decent line-up of new data centers for 2011. We are also optimistic on its recurring revenue model and current expansion plans.

Despite all the positives, we remain a bit apprehensive regarding stiff competition from networking aces like AT&T Inc. (T) and Verizon Inc. (VZ). European exposure is also a cause for concern. Moreover, capex growth could also impact near-term results.

Currently, Equinix has a Zacks #3 Rank, implying a short-term Hold recommendation.

 
EQUINIX INC (EQIX): Free Stock Analysis Report
 
AT&T INC (T): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
Zacks Investment Research