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Digital Realty Trust (DLR) Up 4.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Digital Realty Trust (DLR - Free Report) . Shares have added about 4.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Digital Realty Trust due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Digital Realty Q4 FFO Tops Estimates, Revenues Up Y/Y

Digital Realty’s fourth-quarter 2018 core FFO per share of $1.68 outpaced the Zacks Consensus Estimate by a penny. The figure also comes in higher than the year-ago tally of $1.55.

The company reported operating revenues of $778.3 million for the fourth quarter, which marked a 6.4% year-over-year rise. However, the revenue figure missed the Zacks Consensus Estimate of $790 million. The company has reaffirmed its 2019 core FFO per share outlook.

Signed total bookings during the quarter under review are estimated to generate $44 million of annualized GAAP rental revenues. This would include a $7-million contribution from inter-connection. Notably, the weighted-average lag between leases signed during fourth-quarter 2018 and the contractual commencement date was three months.

Moreover, the company signed renewal leases, marking $138 million of annualized GAAP rental revenues. Rental rates on renewal leases signed during the quarter rolled down 2.6% on a cash basis and ascended 3.2% on a GAAP basis.

Notable Portfolio Activity

During the Dec-end quarter, Digital Realty completed the previously-announced acquisition of Ascenty, a data-center provider in Brazil, in a transaction valued at around $1.8 billion. The company also completed the acquisition of 424 acres of undeveloped land in Loudoun County, VA, for $236.5 million. It is situated near the Washington Dulles International Airport, and positioned near bulk transmission lines and a major fiber path.

Digital Realty also acquired the freehold interest to Sovereign House — a 96,000-square-foot multi-story property — neighboring its Meridian Gate data center and Lawn House parking garage in London for £40 million, or around $51 million.

Moreover, the company acquired a seven-acre land parcel alongside its present holdings in Osaka, Japan, which is likely to support the development of up to 25 megawatts of critical power. This acquisition was made for ¥500 million, or approximately $5 million.

Balance Sheet

Digital Realty exited 2018 with cash and cash equivalents of around $126.7 million, up from the $46.2 million recorded at the prior-quarter end.

Additionally, as of Dec 31, 2018, the company had around $11.1 billion of total debt outstanding, of which $10.4 billion was unsecured debt and around $0.7 billion secured debt. Also, as of the same date, its net debt-to-adjusted EBITDA was 6.2x, while fixed charge coverage was 4.0x.

Outlook Reiterated

Digital Realty reiterated its 2019 core FFO per share outlook of $6.60-$6.70. The full-year outlook provided by the company is backed by revenue projections of $3.2-$3.3 billion, year-end portfolio occupancy growth of +/- 50 bps, and "same-capital" cash NOI growth of +/-2.0%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Digital Realty Trust has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Digital Realty Trust has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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