Yahoo Finance Will Equinix (EQIX) Pull a Surprise this Earnings Season?
Equinix Inc. EQIX is set to report fourth-quarter 2015 results on Feb 18. Last quarter, the company posted a negative earnings surprise of 0.56%.
Let us see how things are shaping up for this announcement.
Factors at Play
Equinix 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. Last year, the company acquired Nimbo — a leading professional services company primarily focused on enabling enterprises to develop and implement hybrid cloud IT architectures — and Bit-isle, which offers outsourced IT services to over 650 customers through six data centers in Japan. Both the acquisitions are anticipated to boost total revenue growth in the fourth quarter.
Furthermore, we are optimistic about Equinix’s recurring revenue model and current expansion plans. Additionally, the company has converted itself into a Real Estate Investment Trust (REIT), effective Jan 1 this year, which should maximize shareholders’ value over the long run.
Nevertheless, we remain slightly cautious about the huge capital outlays which may hurt Equinix’s fourth-quarter profitability. 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 the margins.
Additionally, the telecommunications industry is undergoing consolidation. As customers combine businesses, the requirement for co-location space will decline, thus affecting Equinix’s overall growth prospects.
Earnings Whispers
Our proven model does not conclusively show that Equinix will beat estimates this quarter. That 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. That is not the case here as you will see below.
Zacks ESP: ESP for Equinix is 0.00%. This is because the Most Accurate estimate stands at $3.01 per share, in line with the Zacks Consensus Estimate.
Zacks Rank: Equinix’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) 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 this quarter:
NetEase Inc. NTES, with an Earnings ESP of +0.52% and a Zacks Rank #1.
NVIDIA Corp. NVDA, with an Earnings ESP of +18.75% and a Zacks Rank #3.
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NETEASE INC (NTES): Free Stock Analysis Report
EQUINIX INC (EQIX): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
NVIDIA CORP (NVDA): Free Stock Analysis Report
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