Earnings Preview: Equinix - Analyst Blog
April 26 2011 - 1:37PM
Zacks
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
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