Back to top

Image: Bigstock

Why Is Digital Realty Trust (DLR) Up 6.1% Since Last Earnings Report?

Read MoreHide Full Article

It has been about a month since the last earnings report for Digital Realty Trust (DLR - Free Report) . Shares have added about 6.1% 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 catalysts.

Digital Realty Q2 FFO Surpasses Estimates

Digital Realty’s second-quarter 2019 core FFO per share of $1.64 outpaced the Zacks Consensus Estimate of $1.63. However, the figure comes in lower than the year-ago quarter’s $1.66.

The company reported operating revenues of $800.8 million in the second quarter, marking a 6.1% year-over-year rise. The revenue figure, however, missed the Zacks Consensus Estimate of $808.7 million. Nevertheless, the company reaffirmed its 2019 core FFO per share outlook.

Quarter in Detail

Signed total bookings during the reported quarter are estimated to generate $62 million of annualized GAAP rental revenues. This would include a $9-million contribution from interconnection. Notably, the weighted-average lag between leases signed during second-quarter 2019 and the contractual commencement date was eight months.

Moreover, the company signed renewal leases, marking $125 million of annualized GAAP rental revenues. Rental rates on renewal leases signed during the quarter rolled down 5.8% on a cash basis and declined 3.7% on a GAAP basis.

During the June-end quarter, Digital Realty closed on the purchase of 22.5 acres of land in the Tokyo, Paris and Northern Virginia metro areas, for about $49 million.

Balance Sheet

Digital Realty exited second-quarter 2019 with cash and cash equivalents of around $33.5 million, down from $123.9 million recorded at the end of the prior quarter.

Additionally, as of Jun 30, 2019, the company had around $10.8 billion of total debt outstanding, of which $10.7 billion was unsecured debt and around $0.1 billion secured debt. Also, as of the same date, its net debt-to-adjusted EBITDA was 6.1x, while fixed charge coverage was 4.2x.

Outlook Reiterated

Digital Realty reiterated its 2019 core FFO per share outlook at $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% to -4.0%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Digital Realty Trust has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Digital Realty Trust has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Digital Realty Trust, Inc. (DLR) - free report >>

Published in