Equinix Inc. (EQIX Quick QuoteEQIX - Free Report) is set to report fourth-quarter 2016 results on Feb 15. Last quarter, the company posted a positive earnings surprise of 30.7%. Notably, the stock outperformed the Zacks Consensus Estimate twice, while it missed the same on two occasions in the trailing four quarters, resulting in an average positive surprise of 9.59%.

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 have 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 has been an important part of Equinix's core strategy. We believe that Equinix’s focus on offering upgraded technology to attract clients will bolster its revenues as well as profitability in the to-be-reported quarter.

However, we remain slightly cautious about the huge capital outlays, which may hurt Equinix’s fourth quarter as well as the full-year profitability. It should be noted that, Equinix had cash, cash equivalents and short-term investments of $988.4 million, while its total debt principal outstanding was $6.98 billion as on Sep 30, 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 Quick QuoteT - Free Report) , Level 3 Communications, COLT and Verizon will affect product pricing, thereby denting margins.

Earnings Whispers

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 stand at $3.41 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Equifax has a Zacks Rank #4 (Sell). Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Century Communities, Inc. (CCS Quick QuoteCCS - Free Report) , with an Earnings ESP of +14.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

FirstEnergy Corp. (FE Quick QuoteFE - Free Report) , with an Earnings ESP of +2.56% and a Zacks Rank #3.

Zacks’ Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>