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Iron Mountain's (IRM) Stock Rises 12.4% YTD: Here's How
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Shares of Iron Mountain Incorporated (IRM - Free Report) have gained 12.4% year to date against the industry’s fall of 7%.
This Boston, MA-based real estate investment trust (REIT) continues to benefit from its stable and resilient core storage and records management businesses, enabling it to ride the growth curve. The company’s strategic acquisitions and data center business expansion efforts are likely to have paid off well.
In February 2024, this Zacks Ranks #1 (Strong Buy) company reported fourth-quarter 2023 adjusted funds from operations (AFFO) per share of $1.11, beating the Zacks Consensus Estimate of $1.05. On a year-over-year basis, AFFO per share increased 8.8%. The quarterly results reflected solid performances in the storage and service segments and the data center business.
It expects 2024 AFFO per share in the range of $4.39-$4.51. The Zacks Consensus Estimate for IRM’s current-year AFFO per share is pegged at $4.42, which lies within expectations.
Image Source: Zacks Investment Research
Let’s find out the factors behind the surge in the stock price.
Iron Mountain enjoys a 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 paves the way for a steady stream of recurring revenues for the company.
Iron Mountain’s organic storage rental revenues increased 10% year over year in the fourth quarter of 2024, driven by continued pricing strength with positive volume trends and data center growth.
The company has a diversified tenant and revenue base and serves more than 225,000 clients across different industries and geographical locations. Most importantly, no single customer accounted for more than 1% of its revenues in 2023, reflecting a well-diversified revenue generation base.
In the fourth quarter of 2023, IRM recorded a 92.9% retention rate for its records management business. It is also seeing strong customer retention in the global data center business. These factors are likely to support the company’s cash flows in the quarter ahead. We estimate a year-over-year increase of 11.3% in storage rental revenues in 2024. For 2025 and 2026, the metric is expected to witness growth of 8.2% and 9%, respectively.
To supplement its storage segment performance, IRM has been expanding into its fast-growing businesses, most notable being the data center segment. The company is actively pursuing organic growth efforts along with expansion projects and developments to capitalize on the strong demand for connectivity, interconnection and colocation space. This is likely to drive leasing activity in the upcoming period.
In the fourth quarter, the company achieved data center revenue growth of 23.4%. It leased 124 megawatts of data center capacity in 2023. Moreover, in 2022, it leased 139 megawatts, surpassing its projection of 130 megawatts for the year.
Iron Mountain’s robust balance sheet position, along with ample financial flexibility, has enabled it to capitalize on long-term growth opportunities. As of Dec 31, 2023, it had total liquidity of $2.8 billion. It has no significant debt maturities until 2027 and 80% of its net debt was fixed. Its net total lease-adjusted leverage was 5.1X in 2023, which was the lowest level in a decade.
Additionally, its current cash flow growth is projected at 4.46% compared with the -5.32% expected for the industry. Also, a significant trailing 12-month return on equity compared with the industry’s average of 2.69% reflects its superiority in terms of utilizing shareholders’ funds over its peers.
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 2023 earnings release, it announced a 5.1% hike in its cash dividend to 65 cents per share from 61.85 cents paid out earlier. Such efforts enhance shareholders’ wealth and boost investors’ confidence in the stock. Check Iron Mountain’s dividend history here.
Given the company’s healthy operating platform, our year-over-year AFFO growth projections of 7.4% for 2024, a lower-than-industry payout ratio and solid financial position, the latest dividend hike is likely to be sustainable over the long run.
The Zacks Consensus Estimate for HST’s 2024 funds from operations (FFO) per share has been raised 2.6% northward over the past month to $1.97.
The consensus estimate for GOOD’s current-year FFO per share has moved 5.3% upward over the past two months to $1.38.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Iron Mountain's (IRM) Stock Rises 12.4% YTD: Here's How
Shares of Iron Mountain Incorporated (IRM - Free Report) have gained 12.4% year to date against the industry’s fall of 7%.
This Boston, MA-based real estate investment trust (REIT) continues to benefit from its stable and resilient core storage and records management businesses, enabling it to ride the growth curve. The company’s strategic acquisitions and data center business expansion efforts are likely to have paid off well.
In February 2024, this Zacks Ranks #1 (Strong Buy) company reported fourth-quarter 2023 adjusted funds from operations (AFFO) per share of $1.11, beating the Zacks Consensus Estimate of $1.05. On a year-over-year basis, AFFO per share increased 8.8%. The quarterly results reflected solid performances in the storage and service segments and the data center business.
It expects 2024 AFFO per share in the range of $4.39-$4.51. The Zacks Consensus Estimate for IRM’s current-year AFFO per share is pegged at $4.42, which lies within expectations.
Image Source: Zacks Investment Research
Let’s find out the factors behind the surge in the stock price.
Iron Mountain enjoys a 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 paves the way for a steady stream of recurring revenues for the company.
Iron Mountain’s organic storage rental revenues increased 10% year over year in the fourth quarter of 2024, driven by continued pricing strength with positive volume trends and data center growth.
The company has a diversified tenant and revenue base and serves more than 225,000 clients across different industries and geographical locations. Most importantly, no single customer accounted for more than 1% of its revenues in 2023, reflecting a well-diversified revenue generation base.
In the fourth quarter of 2023, IRM recorded a 92.9% retention rate for its records management business. It is also seeing strong customer retention in the global data center business. These factors are likely to support the company’s cash flows in the quarter ahead. We estimate a year-over-year increase of 11.3% in storage rental revenues in 2024. For 2025 and 2026, the metric is expected to witness growth of 8.2% and 9%, respectively.
To supplement its storage segment performance, IRM has been expanding into its fast-growing businesses, most notable being the data center segment. The company is actively pursuing organic growth efforts along with expansion projects and developments to capitalize on the strong demand for connectivity, interconnection and colocation space. This is likely to drive leasing activity in the upcoming period.
In the fourth quarter, the company achieved data center revenue growth of 23.4%. It leased 124 megawatts of data center capacity in 2023. Moreover, in 2022, it leased 139 megawatts, surpassing its projection of 130 megawatts for the year.
Iron Mountain’s robust balance sheet position, along with ample financial flexibility, has enabled it to capitalize on long-term growth opportunities. As of Dec 31, 2023, it had total liquidity of $2.8 billion. It has no significant debt maturities until 2027 and 80% of its net debt was fixed. Its net total lease-adjusted leverage was 5.1X in 2023, which was the lowest level in a decade.
Additionally, its current cash flow growth is projected at 4.46% compared with the -5.32% expected for the industry. Also, a significant trailing 12-month return on equity compared with the industry’s average of 2.69% reflects its superiority in terms of utilizing shareholders’ funds over its peers.
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 2023 earnings release, it announced a 5.1% hike in its cash dividend to 65 cents per share from 61.85 cents paid out earlier. Such efforts enhance shareholders’ wealth and boost investors’ confidence in the stock. Check Iron Mountain’s dividend history here.
Given the company’s healthy operating platform, our year-over-year AFFO growth projections of 7.4% for 2024, a lower-than-industry payout ratio and solid financial position, the latest dividend hike is likely to be sustainable over the long run.
Other Stocks to Consider
Some other top-ranked stocks from the broader REIT sector are Host Hotels & Resorts (HST - Free Report) and Gladstone Commercial (GOOD - Free Report) , each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HST’s 2024 funds from operations (FFO) per share has been raised 2.6% northward over the past month to $1.97.
The consensus estimate for GOOD’s current-year FFO per share has moved 5.3% upward over the past two months to $1.38.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.