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Iron Mountain (IRM) to Post Q3 Earnings: What's in the Cards?

Zacks Equity Research

Iron Mountain Incorporated IRM is set to release third-quarter 2019 results on Oct 31, before the market opens. The company’s results will likely reflect year-over-year (y/y) growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this real estate investment trust (REIT) posted normalized FFO of 54 cents per share, surpassing the Zacks Consensus Estimate of 51 cents. Results reflected organic growth in its storage rental revenues.

Over the preceding four quarters, the company surpassed the FFO per share estimates on three occasions and missed in the other, the average positive surprise being 1.50%. This is depicted in the graph below:

Iron Mountain Incorporated Price and EPS Surprise
 

Iron Mountain Incorporated Price and EPS Surprise


Iron Mountain Incorporated price-eps-surprise | Iron Mountain Incorporated Quote

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Iron Mountain enjoys a steady stream of recurring revenues from its core storage and record management businesses (RIM). This is expected to have buoyed its top-line growth for third-quarter 2019 as well. In fact, the Zacks Consensus Estimate for third-quarter storage rental revenues from its North America RIM segment is pinned at $315 million, indicating y/y growth of 2.6%.

Further, Iron Mountain has been making diligent efforts to enhance its storage segment performance by focusing on expansion in international markets, specifically, the emerging ones. These efforts are anticipated to have driven the company’s revenues and net operating income (NOI) during the September-end quarter.

In fact, the Zacks Consensus Estimate for quarterly storage revenues is pinned at $673 million, calling for y/y growth of 2.4%. Further, the third-quarter storage NOI is expected to improve 4.5% year over year to $556 million.

Moreover, Iron Mountain’s strategy to supplement its storage segment’s performance with expansion in faster-growing adjacent businesses, primarily data centers, is expected to have aided the company’s quarterly performance. In fact, data-center wins have strengthened the company’s data-center platform. This is expected to result in a 6.4% sequential increase in third-quarter revenues from global data-center business.

However, as archiving of original hard-copy documents losses its relevance, paper needs are shrinking at the enterprise level, resulting in contraction of physical storage volume. Further, volume decline in North America has resulted in aggressive pricing, which is expected to have kept the company's margins under pressure in the quarter under review.

In fact, third-quarter storage rental revenues from the company’s North America data-management segment are expected to have recorded y/y decline of 1.4% to $67 million.

In fact, service-revenue activity level from the company’s North America data-management segment witnessed persistent fall in first-half 2019. This trend is expected to have continued in the third quarter. In fact, the Zacks Consensus Estimate for total revenues from the North American data management segment is pegged at $95 million, calling for a decline of 2% year on year.

Lastly, the company’s activities during the quarter were inadequate to gain analyst confidence. Consequently, the Zacks Consensus Estimate for third-quarter FFO remained unchanged at 58 cents over the past month. Nonetheless, it indicates 5.4% improvement year over year.

Earnings Whispers

Our proven model doesn’t conclusively predict a positive surprise in terms of FFO per share for Iron Mountain this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. That is not the case here, as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Iron Mountain’s Earnings ESP is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks That Warrant a Look

Digital Realty Trust, Inc. DLR, scheduled to release earnings on Oct 29, has an Earnings ESP of +2.61% and carries a Zacks Rank of 3, at present.

Senior Housing Properties Trust SNH, slated to report July-September quarter results on Nov 7, has an Earnings ESP of +3.23% and currently holds a Zacks Rank of 2.

Stag Industrial, Inc. STAG, set to release quarterly figures on Oct 30, has an Earnings ESP of +3.30% and carries a Zacks Rank of 3, at present.

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.

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