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Key Reasons to Add Iron Mountain (IRM) to Your Portfolio Now
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Iron Mountain Incorporated (IRM - Free Report) is well-poised to ride the growth curve backed by its stable and resilient core storage and records management businesses. Its expansionary efforts into the emerging data center business to supplement its storage segment’s performance and solid balance sheet position augur well.
Recently, this Boston, MA-based real estate investment trust (REIT) reported third-quarter adjusted funds from operations (AFFO) of 99 cents, missing the Zacks Consensus Estimate by a whisker. However, the figure increased 1% year over year, attributable to improved adjusted EBITDA but partially offset by higher cash taxes and interest expenses.
Shares of this currently Zacks Rank #2 (Buy) company have gained 6.2% over the past three months compared with the industry’s growth of 0.4%.
Image Source: Zacks Investment Research
What Makes Iron Mountain a Solid 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 third quarter, organic storage rental revenues grew 10% year over year, 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 more than 225,000 clients across different industries and locations. No single customer accounted for more than 1% of its revenues in 2022, reflecting a well-diversified revenue generation base.
Also, the company’s retention rate for its records management business was 93% in the third quarter. It is also seeing strong customer retention in the global data center business. These factors are likely to help the company generate stable cash flows over time.
Expansionary Efforts: IRM has been expanding its fast-growing businesses, especially the data center segment, to supplement its storage segment performance. Given the increasing demand for connectivity, interconnection and colocation space, demand for data centers is likely to rise in the coming years, poising this segment well for growth.
During the third quarter, IRM leased 65 megawatts of data center capacity, bringing the total to 120 megawatts so far in 2023.
FFO Growth: Over the past three to five years, IRM recorded FFO per share growth of 15.93% compared with the industry’s average of 0.53%. 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 pegged at $3.97, suggesting year-over-year growth of 4.47%.
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 Sep 30, 2023, it had more than $1.8 billion of total liquidity and no significant debt maturities until 2027. Such a strong financial footing is likely to support its growth endeavors in the future.
IRM’s current cash flow growth is projected at 11.88% compared with the 8.10% estimated for the industry. In addition, its trailing 12-month return on equity (ROE) is significant compared with the industry’s average of 3.10%. This reflects that the company is more efficient in using shareholders’ funds than its peers.
The Zacks Consensus Estimate for Welltower’s current-year FFO per share has moved marginally northward over the past week to $3.58.
The consensus estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past week to $7.69.
The Zacks Consensus Estimate for Park Hotels & Resorts’ current-year FFO per share has moved 3.1% northward over the past month to $1.98.
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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Key Reasons to Add Iron Mountain (IRM) to Your Portfolio Now
Iron Mountain Incorporated (IRM - Free Report) is well-poised to ride the growth curve backed by its stable and resilient core storage and records management businesses. Its expansionary efforts into the emerging data center business to supplement its storage segment’s performance and solid balance sheet position augur well.
Recently, this Boston, MA-based real estate investment trust (REIT) reported third-quarter adjusted funds from operations (AFFO) of 99 cents, missing the Zacks Consensus Estimate by a whisker. However, the figure increased 1% year over year, attributable to improved adjusted EBITDA but partially offset by higher cash taxes and interest expenses.
Shares of this currently Zacks Rank #2 (Buy) company have gained 6.2% over the past three months compared with the industry’s growth of 0.4%.
Image Source: Zacks Investment Research
What Makes Iron Mountain a Solid 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 third quarter, organic storage rental revenues grew 10% year over year, 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 more than 225,000 clients across different industries and locations. No single customer accounted for more than 1% of its revenues in 2022, reflecting a well-diversified revenue generation base.
Also, the company’s retention rate for its records management business was 93% in the third quarter. It is also seeing strong customer retention in the global data center business. These factors are likely to help the company generate stable cash flows over time.
Expansionary Efforts: IRM has been expanding its fast-growing businesses, especially the data center segment, to supplement its storage segment performance. Given the increasing demand for connectivity, interconnection and colocation space, demand for data centers is likely to rise in the coming years, poising this segment well for growth.
During the third quarter, IRM leased 65 megawatts of data center capacity, bringing the total to 120 megawatts so far in 2023.
FFO Growth: Over the past three to five years, IRM recorded FFO per share growth of 15.93% compared with the industry’s average of 0.53%. 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 pegged at $3.97, suggesting year-over-year growth of 4.47%.
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 Sep 30, 2023, it had more than $1.8 billion of total liquidity and no significant debt maturities until 2027. Such a strong financial footing is likely to support its growth endeavors in the future.
IRM’s current cash flow growth is projected at 11.88% compared with the 8.10% estimated for the industry. In addition, its trailing 12-month return on equity (ROE) is significant compared with the industry’s average of 3.10%. 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 Welltower (WELL - Free Report) , EastGroup Properties (EGP - Free Report) and Park Hotels & Resorts (PK - 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 current-year FFO per share has moved marginally northward over the past week to $3.58.
The consensus estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past week to $7.69.
The Zacks Consensus Estimate for Park Hotels & Resorts’ current-year FFO per share has moved 3.1% northward over the past month to $1.98.
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.