In a bid to expand its Phoenix data-center campus, Iron Mountain Incorporated (IRM - Free Report) recently announced the ground breaking of a new 550,000-square-foot facility.
It will be built on a nine-acre land parcel over the next five years. This 48-megawatt (MW) project with multi-tenant and cloud facility will be delivered in two phases. The first phase is expected to complete in June 2019, with a 24 MW building, spanning 307,000 square feet of space. The second phase will provide a 48 MW building.
Combined with the company’s existing 38 MW data center in the campus, the latest development will enhance Iron Mountain’s Phoenix campus with 100 MW. Further, it will support the rising needs of new and existing customers, including financial services, public cloud providers, aerospace and technology companies, who stand to benefit from more than 25 carrier and network providers present on the campus.
In fact, this $430-million project is a strategic fit as it will enable the company to expand its presence in one of the fastest-growing data-center markets in the United States. Notably, with lower power costs, higher tax efficiency, and negligible geographic and weather-related risks, Phoenix is emerging as an active data-center market.
Per management, this expansion will cater to the increasing needs of hyperscale, public cloud and global enterprise organizations. In fact, the company’s total data-center portfolio potential amounts to more than 285 MW globally.
Iron Mountain has been focusing on an aggressive expansion strategy to penetrate key markets. Recently, it debuted in Montana with two new information management facilities. (Read more: Iron Mountain Sets Foot in Montana With Two New Facilities). Further, in a bid to expand into Croatia, the company announced the acquisition of Zagreb-based Arhiv Trezor. Such measures will likely supportits organic growth in storage revenues and help expand the company’s customer base.
However, these endeavors require heavy investments to set up data centers and acquire new business. Moreover, frequent acquisitions carry higher integration risks, which could impact organic growth.
Also, the company’s highly-leveraged balance sheet may limit its growth plans and worsen its risk profile. Hence, the impact of such capital-intensive strategies on the company’s financials and profitability is unavoidable.
This Zacks Rank #4 (Sell) company has underperformed its industry in the past six months. Shares of Iron Mountain have edged down 0.3% compared with the industry’s gain of 5.1%.
Stocks Worth a Look
A few better-ranked stocks from the same space are PS Business Parks (PSB - Free Report) , Columbia Property Trust, Inc. (CXP - Free Report) and Lamar Advertising Company (LAMR - Free Report) . All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PS Business Parks’ Zacks Consensus Estimate for 2018 funds from operations (FFO) per share has been revised 0.3% upward over the past month. Its shares have returned 15.1% in the past three months.
Columbia Property Trust’s FFO per share estimates for 2018 remained unchanged at $1.46 in the past month. The stock has gained 12.1% in three months’ time.
Lamar’s FFO per share estimates for the current year remained unchanged at $5.40 in the past month. Its shares have gained 1.8% in a year’s time.
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.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>