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5 Reasons to Add Iron Mountain (IRM) to Your Portfolio Now
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Iron Mountain Incorporated (IRM - Free Report) is well-poised to benefit from its resilient business model and expansion into the data center business. Also, its solid balance sheet position bodes well.
Recently, this Boston, MA-based real estate investment trust (REIT) reported second-quarter adjusted funds from operations (AFFO) per share of 94 cents, surpassing the Zacks Consensus Estimate by a whisker. Moreover, the figure improved 1.1% on a year-over-year basis, attributable to improved adjusted EBITDA.
The company also reaffirmed its outlook for 2023 AFFO per share in the range of $3.91-$4.00. The Zacks Consensus Estimate for the same is currently pegged at $3.96, which lies within the company’s guided range.
Shares of this currently Zacks Rank #2 (Buy) company have rallied 11.3% over the past three months against the industry’s decline of 0.5%.
Image Source: Zacks Investment Research
Let us analyze why Iron Mountain seems an attractive portfolio pick for now.
Robust Operating Platform: Iron Mountain enjoys 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, assuring stable rental revenues.
In the second quarter of 2023, Iron Mountain’s organic storage rental revenues increased 10.8% from the prior-year period, highlighting the ongoing advantage of pricing combined with favorable volume trends.
Diversified Tenant and Revenue Base: Iron Mountain has a diversified tenant and revenue base, catering to more than 225,000 million clients across various industries and locations. Notably, no single customer accounted for more than 1% of its revenues in 2022. Further, it has maintained a consistent customer retention of around 98% over the years. Hence, these factors are likely to help the company generate stable cash flows.
Expansionary Initiatives: IRM has been expanding its fast-growing businesses, especially the data center segment, to supplement its storage segment performance.
In the second quarter, the company attained a data center revenue growth of 18% and leased 2.7 megawatts (MW) of capacity. As a result, the total leasing activity for the first half of 2023 summed to 55 MW. Further, given the leasing activity so far, it expects to surpass its 2023 guidance of 80 MW.
Balance Sheet & Cashflow Strength: IRM’s balance sheet position remains robust, with sufficient financial flexibility to meet its near-term debt obligations and other capital commitments while pursuing growth opportunities. As of Jun 30, 2023, it had around $1.7 billion of total liquidity, with no significant debt maturities until 2027. Such strong financial positioning is expected to support the company’s expansionary initiatives in the upcoming period.
Additionally, IRM’s current cash flow growth is projected at 11.88% compared with the 9.37% expected for the industry. In addition, its trailing 12-month return on equity is 116.19% compared with the industry’s average of 2.88%. This indicates that the company is more efficient in using shareholders’ funds than its peers.
Dividend: Solid dividend payouts are arguably the biggest enticements for REIT shareholders and Iron Mountain remains committed to that. In August 2023, concurrent with its second-quarter earnings release, the company announced a 5.1% hike in its cash dividend to 65 cents per share from 61.85 cents paid out earlier. The dividend will be paid on Oct 5 to shareholders on record as of Sep 15, 2023. Moreover, in the last five years, the company has increased its dividends thrice. Given its healthy operating platform and solid financial position, the latest dividend hike is likely to be sustainable.
The Zacks Consensus Estimate for Welltower’s 2023 funds from operations (FFO) per share has been raised marginally over the last 30 days to $3.51.
The consensus estimate for W.P. Carey's current-year FFO per share has moved marginally upward in the last 60 days to $5.36.
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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5 Reasons to Add Iron Mountain (IRM) to Your Portfolio Now
Iron Mountain Incorporated (IRM - Free Report) is well-poised to benefit from its resilient business model and expansion into the data center business. Also, its solid balance sheet position bodes well.
Recently, this Boston, MA-based real estate investment trust (REIT) reported second-quarter adjusted funds from operations (AFFO) per share of 94 cents, surpassing the Zacks Consensus Estimate by a whisker. Moreover, the figure improved 1.1% on a year-over-year basis, attributable to improved adjusted EBITDA.
The company also reaffirmed its outlook for 2023 AFFO per share in the range of $3.91-$4.00. The Zacks Consensus Estimate for the same is currently pegged at $3.96, which lies within the company’s guided range.
Shares of this currently Zacks Rank #2 (Buy) company have rallied 11.3% over the past three months against the industry’s decline of 0.5%.
Image Source: Zacks Investment Research
Let us analyze why Iron Mountain seems an attractive portfolio pick for now.
Robust Operating Platform: Iron Mountain enjoys 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, assuring stable rental revenues.
In the second quarter of 2023, Iron Mountain’s organic storage rental revenues increased 10.8% from the prior-year period, highlighting the ongoing advantage of pricing combined with favorable volume trends.
Diversified Tenant and Revenue Base: Iron Mountain has a diversified tenant and revenue base, catering to more than 225,000 million clients across various industries and locations. Notably, no single customer accounted for more than 1% of its revenues in 2022. Further, it has maintained a consistent customer retention of around 98% over the years. Hence, these factors are likely to help the company generate stable cash flows.
Expansionary Initiatives: IRM has been expanding its fast-growing businesses, especially the data center segment, to supplement its storage segment performance.
In the second quarter, the company attained a data center revenue growth of 18% and leased 2.7 megawatts (MW) of capacity. As a result, the total leasing activity for the first half of 2023 summed to 55 MW. Further, given the leasing activity so far, it expects to surpass its 2023 guidance of 80 MW.
Balance Sheet & Cashflow Strength: IRM’s balance sheet position remains robust, with sufficient financial flexibility to meet its near-term debt obligations and other capital commitments while pursuing growth opportunities. As of Jun 30, 2023, it had around $1.7 billion of total liquidity, with no significant debt maturities until 2027. Such strong financial positioning is expected to support the company’s expansionary initiatives in the upcoming period.
Additionally, IRM’s current cash flow growth is projected at 11.88% compared with the 9.37% expected for the industry. In addition, its trailing 12-month return on equity is 116.19% compared with the industry’s average of 2.88%. This indicates that the company is more efficient in using shareholders’ funds than its peers.
Dividend: Solid dividend payouts are arguably the biggest enticements for REIT shareholders and Iron Mountain remains committed to that. In August 2023, concurrent with its second-quarter earnings release, the company announced a 5.1% hike in its cash dividend to 65 cents per share from 61.85 cents paid out earlier. The dividend will be paid on Oct 5 to shareholders on record as of Sep 15, 2023. Moreover, in the last five years, the company has increased its dividends thrice. Given its healthy operating platform and solid financial position, the latest dividend hike is likely to be sustainable.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Welltower (WELL - Free Report) and W.P. Carey (WPC - 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 Welltower’s 2023 funds from operations (FFO) per share has been raised marginally over the last 30 days to $3.51.
The consensus estimate for W.P. Carey's current-year FFO per share has moved marginally upward in the last 60 days to $5.36.
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.