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Iron Mountain (IRM) to Report Q3 Earnings: What's in Store?

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Iron Mountain Inc. (IRM - Free Report) is set to release third-quarter 2017 results on Oct 24.

Last quarter, earnings of 55 cents per share surpassed the Zacks Consensus Estimate of 52 cents and increased 14.6% year over year. However, in the trailing four quarters, the company delivered an average negative surprise of 8.08%.

Revenues of $949.8 million missed the consensus mark of $955.2 million but improved 7.5% year over year.

The company attributed the year–over-year improvement in results to accretive Recall Holdings acquisition, transformation initiatives and continued strong performance of its storage rental business.

Notably, shares of Iron Mountain have gained 26% year to date, significantly outperforming the industry’s 3.4% rally.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Iron Mountain’s strong product portfolio, increasing market share and promising international business are the primary growth catalysts.

The company’s entry into the data center market is likely to be a growth driver. We note that it is investing a lot in setting up its data center business.

In the month of July, the company acquired MAG Datacenters, which operates FORTRUST for $128 million. The acquisition is expected to bolster the company’s presence in the Western U.S data center market by adding 9 MW of existing capacity and enhancing opportunity for further expansion in the future.

Last month, Iron Mountain unveiled the first of the four announced data centers in Northern Virginia. The company already has data centers in Boston, Denver, Kansas City and Western Pennsylvania. Combined with the data center facility in North Virginia, the company will have 30 megawatts of capacity by year end, per management.

The company’s data center in Northern Virginia was also selected by Virtustream to expand its cloud footprint. Moreover, the company's recent announcement to acquire data centers in London and Singapore will help it gain ground in the international markets in our view.

However, Iron Mountain’s Service revenues remain modest due to falling activity rates as stored records are becoming less active. Besides, forex fluctuations, fragmented nature of the industry and stiff competition continue to be overhangs. Further, the company’s highly-leveraged balance sheet remains a concern.

Earnings Whispers

Our proven model does not conclusively show that Iron Mountain is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESPand 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: Iron Mountain’s Earnings ESP is -1.35%. This is because the Most Accurate estimate of 55 cents is lower than the Zacks Consensus Estimate of 56 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Iron Mountain carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to deliver an earnings beat in their upcoming release:

Applied Materials (AMAT - Free Report) with an Earnings ESP of +0.37% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kemet Corporation (KEM - Free Report) with an Earnings ESP of +7.46% and a Zacks Rank #1.

Vishay Intertechnology (VSH - Free Report) with an Earnings ESP of +6.19% and a Zacks Rank #1.

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