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Should You Hold Iron Mountain (IRM) Stock In Your Portfolio?
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Iron Mountain Incorporated (IRM - Free Report) enjoys a steady stream of recurring revenues from its core storage and record management businesses. However, softer recycled paper prices will likely keep the company under pressure this year.
Despite the ongoing digitization trends, document storage and management remains a very tenable business. In fact, Iron Mountain has enjoyed a consistent box retention rate of 98%, with more than 50% of its boxes staying in the facilities for 15 years on average. This durable business also drives significant cross-selling synergies across different segments and delivers robust cash-flow growth.
Additionally, amid volume declines in North America, Iron Mountain is enhancing its storage segment performance by focusing on expansion in international markets, specifically, emerging markets. In fact, Iron Mountain recently expanded its footprint in Colombia with the acquisition of Suppla's Business Process Outsourcing unit. The move comes as part of the company’s move to boost its presence in Latin America, a region that offers substantial scope for the information management business’ growth. (Read more: Iron Mountain Buys Suppla Unit, Eyes Growth in Latin America).
These efforts will likely enable the company to witness overall organic volumes growth. Additionally, by scaling up its emerging market platform, the company can accelerate the EBITDA growth rate.
Moreover, Iron Mountain is supplementing its storage segment’s performance with expansion in faster-growing adjacent businesses, most notably being data centers. In fact, data-center wins and a robust pipeline indicate Iron Mountain’s solid data-center platform which offers a long growth runway.
Accordingly, in August, Iron Mountain announced the opening of a second enterprise-class data-center facility, AZP-2 in Phoenix. At full build out, the three-story facility will encompass more than 530,000 gross square feet and offer 48 megawatts of total IT capacity.
However, as archiving of original hard-copy documents losses its relevance, paper needs are shrinking at the enterprise level. This is resulting in contraction of physical storage volume. Additionally, increased adoption of alternative technologies for record storage is a key risk to Iron Mountain.
Further, the company’s Service revenues remain modest due to falling activity rates as stored records are becoming less active. Also, recycled paper prices are expected to fall in the near term due to lower pulp prices and oversupply of paper for recycling. The recovery in prices will likely be slow, thus making it difficult for the company to achieve its top-line targets.
Additionally, lower volume growth in the company’s more mature markets have resulted in aggressive pricing and will likely keep margins under pressure in the near term. In fact, service-revenue activity level from the company’s North American Data Management Business segment witnessed continued fall in first-half 2019.
Shares of this Zacks Rank #3 (Hold) company have gained 6.2% over the past month compared with its industry’s 3.1% rally.
Alexandria Real Estate’s Zacks Consensus Estimate for 2019 funds from operations (FFO) per share remained unchanged at $6.98 in the past month.
EastGroup Properties' FFO per share estimate for the current year moved up marginally to $4.92 over the past month.
Extra Space Storage's Zacks Consensus Estimate for the ongoing year’s FFO per share climbed marginally to $4.86 in a month’s time.
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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Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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Should You Hold Iron Mountain (IRM) Stock In Your Portfolio?
Iron Mountain Incorporated (IRM - Free Report) enjoys a steady stream of recurring revenues from its core storage and record management businesses. However, softer recycled paper prices will likely keep the company under pressure this year.
Despite the ongoing digitization trends, document storage and management remains a very tenable business. In fact, Iron Mountain has enjoyed a consistent box retention rate of 98%, with more than 50% of its boxes staying in the facilities for 15 years on average. This durable business also drives significant cross-selling synergies across different segments and delivers robust cash-flow growth.
Additionally, amid volume declines in North America, Iron Mountain is enhancing its storage segment performance by focusing on expansion in international markets, specifically, emerging markets. In fact, Iron Mountain recently expanded its footprint in Colombia with the acquisition of Suppla's Business Process Outsourcing unit. The move comes as part of the company’s move to boost its presence in Latin America, a region that offers substantial scope for the information management business’ growth. (Read more: Iron Mountain Buys Suppla Unit, Eyes Growth in Latin America).
These efforts will likely enable the company to witness overall organic volumes growth. Additionally, by scaling up its emerging market platform, the company can accelerate the EBITDA growth rate.
Moreover, Iron Mountain is supplementing its storage segment’s performance with expansion in faster-growing adjacent businesses, most notably being data centers. In fact, data-center wins and a robust pipeline indicate Iron Mountain’s solid data-center platform which offers a long growth runway.
Accordingly, in August, Iron Mountain announced the opening of a second enterprise-class data-center facility, AZP-2 in Phoenix. At full build out, the three-story facility will encompass more than 530,000 gross square feet and offer 48 megawatts of total IT capacity.
However, as archiving of original hard-copy documents losses its relevance, paper needs are shrinking at the enterprise level. This is resulting in contraction of physical storage volume. Additionally, increased adoption of alternative technologies for record storage is a key risk to Iron Mountain.
Further, the company’s Service revenues remain modest due to falling activity rates as stored records are becoming less active. Also, recycled paper prices are expected to fall in the near term due to lower pulp prices and oversupply of paper for recycling. The recovery in prices will likely be slow, thus making it difficult for the company to achieve its top-line targets.
Additionally, lower volume growth in the company’s more mature markets have resulted in aggressive pricing and will likely keep margins under pressure in the near term. In fact, service-revenue activity level from the company’s North American Data Management Business segment witnessed continued fall in first-half 2019.
Shares of this Zacks Rank #3 (Hold) company have gained 6.2% over the past month compared with its industry’s 3.1% rally.
Stocks to Consider
Investors can also consider some better-ranked stocks from the same space like Alexandria Real Estate Equities, Inc. (ARE - Free Report) , Extra Space Storage Inc. (EXR - Free Report) and EastGroup Properties, Inc. (EGP - Free Report) each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alexandria Real Estate’s Zacks Consensus Estimate for 2019 funds from operations (FFO) per share remained unchanged at $6.98 in the past month.
EastGroup Properties' FFO per share estimate for the current year moved up marginally to $4.92 over the past month.
Extra Space Storage's Zacks Consensus Estimate for the ongoing year’s FFO per share climbed marginally to $4.86 in a month’s time.
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.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>