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Digital Realty (DLR) Beats Q1 FFO Estimates, Raises '21 View

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Digital Realty Trust, Inc. (DLR - Free Report) delivered first-quarter 2021 core funds from operations (FFO) per share of $1.67, beating the Zacks Consensus Estimate of $1.59. Results highlight better-than-anticipated revenue numbers. The reported figure also compares favorably with the year-ago quarter’s $1.53.

The company registered operating revenues of $1.1 billion in the first quarter, marking a 32.4% year-over-year jump. The revenue figure also outpaced the Zacks Consensus Estimate of $1.05 billion.

Decent leasing activities and strong signed total bookings aided results. Digital transformation is driving steady demand. The data-center REIT has also raised the core FFO per share outlook for 2021.

According to Digital Realty’s CEO A. William Stein, "Our first-quarter bookings were very well balanced across products and regions, reflecting the strength of our full-service global platform.  We are investing to support customer growth and to continue to enhance the value of our comprehensive product offerings, and we remain well positioned to continue to deliver sustainable growth for all stakeholders."

Quarter in Detail

Signed total bookings during the reported quarter are estimated to generate $117 million of annualized GAAP rental revenues. This is expected to include a $13-million contribution from interconnection. Notably, the weighted-average lag between leases signed during the first quarter and the contractual commencement date was eight months.

Digital Realty signed renewal leases, marking $193 million of annualized GAAP rental revenues during the March-end quarter. Rental rates on renewal leases signed during the quarter rolled down 2.1% on a cash basis but went up 3.2% on a GAAP basis.

Also, the company generated first-quarter adjusted EBITDA of $615 million, up 6% sequentially and 28% year on year.

Portfolio Activity

During the January-March quarter, Digital Realty acquired a 66,400-square-foot building and an adjacent 4.7-acre land parcel in Brussels, Belgium that will support the development of 13.6 megawatts of IT capacity for €13 million, or about $15 million.

The data-center REIT closed on the sale of a portfolio of 11 data centers in Europe for a total of roughly $680 million. Moreover, it sold a 6.4-acre land parcel in Ashburn, VA for $12 million and a 30,400-square foot vacant building in Waltham, MA for around $2 million.

Balance Sheet

Digital Realty exited 2021 with cash and cash equivalents of $221.1 million, down from the $108.5 million recorded at year-end 2020. Additionally, as of Mar 31, 2021, the data-center REIT had $13.3 billion of total debt outstanding, of which $13.1 billion was unsecured debt and $0.2 billion was secured debt. Also, as of the same date, its net debt-to-adjusted EBITDA was 5.6X, while fixed charge coverage was 5.8X.

Guidance

Digital Realty raised the estimate for 2021 core FFO per share to $6.50-$6.55 from the $6.40-$6.50 guided earlier. The Zacks Consensus Estimate for the same is currently pegged at $6.48.

It projects full-year total revenues of$4.3-$4.4 billion compared with the $4.25-$4.35 billion projected earlier, adjusted EBITDA of $2.33-$2.38 billion versus the $2.3-$2.35 billion estimated before. However, the guidance remains unrevised for year-end portfolio occupancy of 84-85% and same-capital cash NOI decline of 2.5-3.5%.

Currently, Digital Realty carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Digital Realty Trust, Inc. Price, Consensus and EPS Surprise

Digital Realty Trust, Inc. Price, Consensus and EPS Surprise

Digital Realty Trust, Inc. price-consensus-eps-surprise-chart | Digital Realty Trust, Inc. Quote

We now look forward to the earnings releases of other REITs, including Vornado Realty Trust (VNO - Free Report) , Realty Income Corporation (O - Free Report) and Healthpeak Properties, Inc. (PEAK - Free Report) , which are slated to report next week.

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

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