We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Iron Mountain (IRM) is an Apt Portfolio Pick for Now
Read MoreHide Full Article
Shares of Iron Mountain Incorporated (IRM - Free Report) , currently carrying a Zacks Rank #2 (Buy), have gained 5.4% in the quarter-to-date period against its industry's decline of 2%.
Recently, this Boston, MA-based real estate investment trust (REIT) reported first-quarter adjusted funds from operations (AFFO) per share of 97 cents, surpassing the Zacks Consensus Estimate of 93 cents. Moreover, the figure improved 6.6% from the year-ago quarter’s 91 cents, attributable to improved adjusted EBITDA.
Also, quarterly total revenues of $1.314 billion beat the Zacks Consensus Estimate of $1.313 billion and increased 5.3% year over year. IRM’s results reflected solid performance in the storage and service segments, and the data-center business.
Image Source: Zacks Investment Research
Let us now decipher why Iron Mountain is a solid portfolio pick.
Resilient Business Model: IRM has stable and resilient core storage and records management businesses. It 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 assures a steady stream of recurring revenues for the company.
In the first quarter of 2023, storage rental revenues increased 7.9% year over year to $810.1 million. Also, service revenues amounted to $504.3 million, reflecting a rise of 1.5%. Moreover, organic storage rental revenues grew 11% from the prior-year period, highlighting the continued benefit of pricing coupled with positive volume trends.
Diverse Tenant & Revenue Base: Iron Mountain enjoys a diversified tenant and revenue base and serves around 225,000 clients across different industries and locations. Moreover, no single customer accounted for more than 1% of its revenues in 2022, reflecting a well-diversified revenue generation base. Further, the company has maintained a consistent customer retention of approximately 98% over the years. These factors enable the company to generate stable cashflows.
Expansionary Efforts: IRM has been expanding its fast-growing businesses, especially the data center segment, to supplement its storage segment performance. It leased 52 megawatts of data center capacity in the first quarter of 2023. The company expects to lease 80 megawatts or more in 2023.
Moreover, in November 2022, the company acquired XData Properties, one of the largest data center parks in Madrid, and expanded its data center footprint in the EMEA region. Simultaneously, it bought a 10-acre land parcel and 50+ MVA (expandable to 100+ MVA) substation in Phoenix, AZ, and broadened its data center presence in North America.
FFO Growth:Over the past three to five years, IRM recorded FFO per share growth of 14.54% compared with the industry’s average of 0.11%. Moreover, the company reaffirmed its guidance for 2023 and expects AFFO per share in the range of $3.91-$4.00. The Zacks Consensus Estimate for the same is currently pegged at $3.96, suggesting growth of 3.68% for 2023 compared with the industry’s average of 0.73%.
Balance Sheet & Cash Flow Strength: Iron Mountain maintains a healthy balance sheet position with ample financial flexibility to meet its near-term debt obligations and other capital commitments while pursuing growth opportunities. As of Mar 31, 2023, it had nearly $1 billion of total liquidity and no significant debt maturities until 2027. Such a strong financial footing supports its expansion efforts.
IRM’s current cash flow growth is projected at 11.88% compared with the 8.77% expected for the industry. In addition, its trailing 12-month return on equity (ROE) is 88.40% compared with the industry’s average of 3.41%. This reflects that the company is more efficient in using shareholders’ funds than its peers.
Image: Bigstock
Here's Why Iron Mountain (IRM) is an Apt Portfolio Pick for Now
Shares of Iron Mountain Incorporated (IRM - Free Report) , currently carrying a Zacks Rank #2 (Buy), have gained 5.4% in the quarter-to-date period against its industry's decline of 2%.
Recently, this Boston, MA-based real estate investment trust (REIT) reported first-quarter adjusted funds from operations (AFFO) per share of 97 cents, surpassing the Zacks Consensus Estimate of 93 cents. Moreover, the figure improved 6.6% from the year-ago quarter’s 91 cents, attributable to improved adjusted EBITDA.
Also, quarterly total revenues of $1.314 billion beat the Zacks Consensus Estimate of $1.313 billion and increased 5.3% year over year. IRM’s results reflected solid performance in the storage and service segments, and the data-center business.
Image Source: Zacks Investment Research
Let us now decipher why Iron Mountain is a solid portfolio pick.
Resilient Business Model: IRM has stable and resilient core storage and records management businesses. It 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 assures a steady stream of recurring revenues for the company.
In the first quarter of 2023, storage rental revenues increased 7.9% year over year to $810.1 million. Also, service revenues amounted to $504.3 million, reflecting a rise of 1.5%. Moreover, organic storage rental revenues grew 11% from the prior-year period, highlighting the continued benefit of pricing coupled with positive volume trends.
Diverse Tenant & Revenue Base: Iron Mountain enjoys a diversified tenant and revenue base and serves around 225,000 clients across different industries and locations. Moreover, no single customer accounted for more than 1% of its revenues in 2022, reflecting a well-diversified revenue generation base. Further, the company has maintained a consistent customer retention of approximately 98% over the years. These factors enable the company to generate stable cashflows.
Expansionary Efforts: IRM has been expanding its fast-growing businesses, especially the data center segment, to supplement its storage segment performance. It leased 52 megawatts of data center capacity in the first quarter of 2023. The company expects to lease 80 megawatts or more in 2023.
Moreover, in November 2022, the company acquired XData Properties, one of the largest data center parks in Madrid, and expanded its data center footprint in the EMEA region. Simultaneously, it bought a 10-acre land parcel and 50+ MVA (expandable to 100+ MVA) substation in Phoenix, AZ, and broadened its data center presence in North America.
FFO Growth: Over the past three to five years, IRM recorded FFO per share growth of 14.54% compared with the industry’s average of 0.11%. Moreover, the company reaffirmed its guidance for 2023 and expects AFFO per share in the range of $3.91-$4.00. The Zacks Consensus Estimate for the same is currently pegged at $3.96, suggesting growth of 3.68% for 2023 compared with the industry’s average of 0.73%.
Balance Sheet & Cash Flow Strength: Iron Mountain maintains a healthy balance sheet position with ample financial flexibility to meet its near-term debt obligations and other capital commitments while pursuing growth opportunities. As of Mar 31, 2023, it had nearly $1 billion of total liquidity and no significant debt maturities until 2027. Such a strong financial footing supports its expansion efforts.
IRM’s current cash flow growth is projected at 11.88% compared with the 8.77% expected for the industry. In addition, its trailing 12-month return on equity (ROE) is 88.40% compared with the industry’s average of 3.41%. This reflects that the company is more efficient in using shareholders’ funds than its peers.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Host Hotels & Resorts (HST - Free Report) and Stag Industrial (STAG - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ current-year funds from operations (FFO) per share is pegged at $2.13.
The Zacks Consensus Estimate for Host Hotels & Resorts’ 2023 FFO per share is pegged at $1.85.
The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share is pegged at $2.25.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.