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Digital Realty (DLR) Misses Q2 FFO Estimates, Revises '21 View

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Digital Realty Trust, Inc. (DLR - Free Report) delivered second-quarter 2021 core funds from operations (FFO) per share of $1.54, missing the Zacks Consensus Estimate of $1.58. Results highlight a 12 cents per share non-cash charge to reflect the higher corporate tax rate in the U.K. The reported figure is in line with the year-ago quarter’s tally.

The company registered revenues of $1.1 billion in the second quarter, marking a 10.1% year-over-year jump. The revenue figure also outpaced the Zacks Consensus Estimate of $1.07 billion.

Adjusted EBITDA of $603 million in the quarter marks an 8% increase year on year.

Decent leasing activities and strong signed total bookings aided the company. Digital transformation is driving steady demand.

According to Digital Realty’s CEO A. William Stein, "Bookings in the quarter reflect the continued adoption of PlatformDIGITAL with strong new logo growth and balanced product sales.  By investing to support our customers' growth around the world, we are widening our competitive moat which results in sustainable growth for our shareholders."

Concurrent with its earnings release, Digital Realty announced acquiring a land parcel in Seoul, South Korea, which is expected to support the development of up to 64 megawatts of critical IT capacity.

Quarter in Detail

Signed total bookings during the reported quarter are estimated to generate $113 million of annualized GAAP rental revenues. This is likely to include a $13-million contribution from interconnection. Notably, the weighted-average lag between leases signed during the second quarter and the contractual commencement date was seven months.

Digital Realty signed renewal leases, marking $178 million of annualized GAAP rental revenues during the June-end quarter. Rental rates on renewal leases signed during the quarter rolled up 0.1% on a cash basis and 2.1% on a GAAP basis.

Portfolio Activity

During the April-June period, Digital Realty closed the acquisition of a five-acre land parcel in Seoul, South Korea, for roughly $66 million and an 18.5-acre land parcel in Sydney, Australia for $65 million. The two sites are estimated to support the development of around 64 megawatts and 97 megawatts of IT load, respectively.  

The data-center REIT concluded the sale of a vacant, 240,000-square foot office and industrial property in Phoenix, AZ, for $19 million.

Balance Sheet

Digital Realty exited second-quarter 2021 with cash and cash equivalents of $120.5 million, down from the $221.1 million recorded at the end of first-quarter 2021. Additionally, as of Jun 30, 2021, the data-center REIT had $13.9 billion of total debt outstanding, of which $13.7 billion was unsecured debt and $0.2 billion was secured debt. Also, as of the same date, its net debt-to-adjusted EBITDA was 6.0X, while fixed charge coverage was 5.4X.

Guidance

Digital Realty revised the estimate for 2021 core FFO per share to $6.45-$6.50 from the $6.50-$6.55 guided earlier on incorporation of the 12 cents per share non-cash charge associated with the higher corporate tax rate in the U.K. The Zacks Consensus Estimate for the same is currently pegged at $6.51.

It projects full-year total revenues of $4.325-$4.425 billion compared with the $4.3-$4.4 billion projected earlier, adjusted EBITDA of $2.35-$2.4 billion versus the $2.33-$2.38 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 will be reported 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.