What's in the Cards for Iron Mountain (IRM) in Q4 Earnings? - February 21, 2023

February 21, 2023

Iron Mountain Incorporated (IRM - Free Report) is slated to release fourth-quarter and full-year 2022 results on Feb 23 before the opening bell. The company’s quarterly results are likely to display year-over-year growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this real estate investment trust (REIT) delivered a surprise of 2.08% in terms of adjusted FFO (AFFO) per share. Its results reflected solid performance in the storage and service segments, and the data-center business.

Over the trailing four quarters, Iron Mountain’s FFO per share surpassed the Zacks Consensus Estimate on each occasion, the average beat being 9.35%. The graph below depicts this surprise history:

Factors to Note

Iron Mountain has a durable business model and 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 is likely to have led to steady storage rental revenue generation for the company during the fourth quarter

The Zacks Consensus Estimate for storage rental revenues is pegged at $762.4 million, suggesting a marginal improvement from the prior quarter’s $760 million and 5.1% from the year-ago period’s $719 million.

The company’s service revenues, which comprise charges for related core service activities and a wide array of complementary products and services, are expected to have improved during the quarter.

The consensus estimate for service revenues is pegged at $542.4 million, indicating a rise of 2.8% from the prior quarter’s $527 million and an increase of 24.9% from the year-ago quarter’s $434 million.

Additionally, Iron Mountain’s diversified tenant and revenue base across different industries and geographical locations might have paid off well during the fourth quarter.

IRM has been expanding its fast-growing businesses, especially the data center segment, to supplement its storage segment performance. It was quite evident that it has remained focused on the same during the to-be-reported quarter.

In November 2022, the company closed the acquisition of XData Properties, one of the largest data center parks in Madrid, and expanded its data center footprint in the EMEA region. Being centrally located within hyperscale availability zones and having an ideal position for built-to-suit deployments, the buyout was a strategic fit.

Simultaneously, IRM bought a 10-acre land parcel and 50+ MVA (expandable to 100+ MVA) substation in Phoenix, AZ, and broadened its data center presence in North America. The land was bought to develop a 36-megawatt, 230,000 square feet data center, phase one of which is expected to be delivered in 2024.

Further, strong demand for connectivity, interconnection and colocation space is likely to have driven data center leasing activity in the quarter.

In its third-quarter earnings presentation, management projected total revenues to be around $1.3 billion, adjusted EBITDA to be roughly $470 million, AFFO to be nearly $280 million and AFFO per share to be 94 cents for the fourth quarter.

The consensus estimate for fourth-quarter total revenues is pegged at $1.31 billion, suggesting a year-over-year increase of 12.8%.

However, given that a major part of the company’s business lies outside the United States, a stronger U.S. dollar might have cast a pall on its quarterly performance.

The Zacks Consensus Estimate for the quarterly FFO per share has been unchanged at 94 cents over the past month. Nonetheless, the figure suggests a year-over-year increase of 27%.

For 2022, management projected AFFO per share to lie between $3.70 and $3.82. Total revenues are expected to be within $5.125-$5.275 billion, while adjusted EBITDA is estimated to be in the band of $1.80-$1.85 billion.

For the full year, the Zacks Consensus Estimate for FFO per share has been unrevised at $3.76 over the past month. The figure, however, indicates a 36.2% rise from the year-earlier reported figure on revenues of $5.13 billion.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an FFO beat for Iron Mountain this time. The right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that is not the case here.

Earnings ESP: IRM has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: IRM currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:

Park Hotels & Resorts (PK - Free Report) is scheduled to report quarterly figures on Feb 22. PK currently has an Earnings ESP of +3.66% and a Zacks Rank #3.

Extra Space Storage (EXR - Free Report) is scheduled to report quarterly figures on Feb 22. EXR currently has an Earnings ESP of +4.01% and a Zacks Rank of 3.

DigitalBridge Group (DBRG - Free Report) is scheduled to report quarterly figures on Feb 24. DBRG currently has an Earnings ESP of +46.67% and a Zacks Rank of 3.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.

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