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Iron Mountain (IRM) Q2 FFO Beats, Revenues Miss Estimates

Zacks Equity Research

Iron Mountain Incorporated IRM reported second-quarter 2019 normalized funds from operations (FFO) per share of 54 cents, beating the Zacks Consensus Estimate of 51 cents. However, the reported figure compares unfavorably with the year-ago quarter’s 58 cents.

Results reflect lower recycled paper prices in the company’s Secure Shred business compared with the prior year. Further, adjusted FFO (AFFO) fell 8.1% year over year to $209.6 million.

Revenues of $1.06 billion missed the Zacks Consensus Estimate of $1.07 billion. The reported figure, nonetheless, improved 0.6% year over year.

Quarter Details

Storage rental revenues came in at $669 million in the second quarter, highlighting a 2.1% year-on-year increase. The company recorded 2.4% organic growth, year over year. In developed markets, storage organic revenue growth came in at 1.3%, while in Other International markets, storage organic revenues were up 3.7% year over year.

Service revenues amounted to $397.6 million in the reported quarter, indicating a year-over-year decline of 1.9%. Service organic revenue growth in developed markets declined 2.1%, while in Other International markets, the figure was down 2%.

Adjusted EBITDA margin shrunk 170 basis points (bps) to 32.9%, suggesting higher costs. The company registereda 10-basis point expansion in North America Records and Information management (RIM) and a 30-basis point increase in Other International segments adjusted EBITDA margin. However, a 30-basis point contraction in Western Europe, 20-basis point decline in North America Data Management, 120-basis point fall in Corporate and Other, and a 100-basis point slip in Global Data Center segments adjusted EBITDA margin dented results.


Iron Mountain revised its guidance for 2019. Particularly, the company projects revenues at $4,250-$4,325 million compared with the prior outlook of $4,200-$4,400 million, and adjusted EBITDA of $1,440-$1,480 as compared with the previously estimate of $1,420-$1,530 million. Further, AFFO is estimated to be in the range of of $870-$900 million as compared with $870 - $930 million earlier projected.

Our Take

Iron Mountain’s efforts to shift its revenue mix to faster-growing businesses, like emerging markets, data-center and other complementing business segments, supported the company’s the June-end quarter performance. However, its Service revenues remain modest due to dropping activity rates as stored records are becoming less active. Also, recycled paper prices affected results, making it difficult for the company to achieve its top-line targets.

While the company is expanding its data-center footprint in international markets, near-term rise in costs from such efforts will likely dampen its financials, especially as it already has a highly-leveraged balance sheet.

Iron Mountain Incorporated Price, Consensus and EPS Surprise

Iron Mountain Incorporated Price, Consensus and EPS Surprise

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

Iron Mountain currently has a Zacks Rank #4 (Sell).

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

Performance of Other REITs

Cousins Properties Incorporated CUZ reported second-quarter FFO per share (before TIER transaction costs) of 71 cents, missing the Zacks Consensus Estimate by a whisker. Nonetheless, the figure came in higher than the prior-year quarter’s reported tally of 60 cents.

SL Green Realty Corp. SLG delivered second-quarter 2019 FFO of $1.82 per share, surpassing the Zacks Consensus Estimate of $1.73. The tally includes promote income from the sale of 521 Fifth Avenue of $3.4 million or 4 cents per share. Results also compared favorably with the year-ago quarter’s tally of $1.69.

Crown Castle International Corp. CCI posted second-quarter adjusted AFFO per share of $1.48, up from the prior-year figure of $1.31. Furthermore, the reported figure outpaced the Zacks Consensus Estimate of $1.43.

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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