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Can Iron Mountain (IRM) Retain its Beat Streak in Q4 Earnings?

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Iron Mountain Incorporated (IRM - Free Report) is set to release fourth-quarter and 2020 results on Feb 24, before the opening bell. The company’s quarterly funds from operations (FFO) per share and revenues are expected to have declined year over year.

In the last reported quarter, this real estate investment trust (REIT) posted normalized FFO per share of 61 cents, which beat the Zacks Consensus Estimate of 55 cents. Results reflected strength in the company’s core storage business.

The company surpassed the FFO per share estimates in each of the trailing four quarters, the average surprise being 17.85%. This is depicted in the graph below:

Iron Mountain Incorporated Price and EPS Surprise

 

Iron Mountain Incorporated Price and EPS Surprise

Iron Mountain Incorporated price-eps-surprise | Iron Mountain Incorporated Quote

Factors to Note

In the fourth quarter, Iron Mountain is expected to have benefited from a steady stream of recurring revenues from its core storage and record management businesses. In fact, the company derives the majority of its revenues from fixed periodic (usually earned on a monthly basis) storage rental fees charged to customers based on the volume of their records stored. This along with high box retention rate is likely to have rendered storage rental revenue stability.

Markedly, the fourth-quarter consensus estimate for the same stands at $693 million, suggesting a 2.5% improvement from the year-ago reported figure.

Also, Iron Mountain’s data center business is expected to have continued to benefit from the growing IT infrastructure market in the fourth quarter.  Notably, at the onset of the pandemic, remote-working needs forced and accelerated digital transformation. This along with an increasing pace of cloud adoption is expected to have led to an increased data center demand.

Moreover, there has been a higher need for digital transformations from federal entities, while new technologies like 5G and augmented reality have been creating additional opportunities for edge deployments and data center operators.

Therefore, Iron Mountain’s acquisition and development initiatives over the prior quarters are anticipated to have reaped benefits and stoked growth in the period under consideration.

Accordingly, the Zacks Consensus Estimate for fourth-quarter revenues from the global data-center business is pegged at $73 million, indicatingan improvement from the year-ago reported figure of $69 million.

However, the data storage company is expected to have continued bearing the brunt of rampant shifts in data storage through non-paper-based technologies. This is expected to have hindered physical storage volume and the demand for the handling of records, denting service activity levels and records management volume. Also, lower volumes are expected to have led to aggressive pricing and hindered margins in the quarter under review.

Apart from this, the demand for the company’s core service offerings is anticipated to have has been further affected by its customers operating at significantly lower capacities amid the pandemic-led restrictions.

In fact, the consensus estimate for fourth-quarter service revenues is pegged at $353 million, which indicates a decline of 12.6% from the prior-year quarter’s reported figure.

Overall, total revenues for the fourth quarter are pinned at $1.04 billion and the figure indicates a 3.6% year-over-year decline.

Also, Iron Mountain’s activities in the quarter under review were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for fourth-quarter FFO per share has been unrevised at 60 cents in a month’s time. It also suggests a 7.7% year-over-year decline.

For the year, the Zacks Consensus Estimate for FFO per share has been unrevised at $2.30 over the past month. The figure suggests a 0.4% year-over-year increase. Revenues are projected to be down 3.14% year over year to $4.1 billion.

Earnings Whispers

Our proven model does not conclusively predict a surprise in terms of FFO per share for Iron Mountain this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. That is not the case here, as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Iron Mountain’s Earnings ESP is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

American Tower Corporation (AMT - Free Report) , set to report quarterly numbers on Feb 25, currently has an Earnings ESP of +7.49% and a Zacks Rank of 3.

Life Storage, Inc. (LSI - Free Report) , slated to release earnings figures on Feb 22, has an Earnings ESP of +0.43% and a Zacks Rank of 3, currently.

National Storage Affiliates Trust (NSA - Free Report) , scheduled to announce fourth-quarter results on Feb 22, has an Earnings ESP of +4.30% and a Zacks Rank of 2 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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