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Iron Mountain Incorporated IRM is set to release first-quarter 2020 results on May 7, before market open. While the company’s quarterly funds from operations (FFO) per share are expected to have declined, its revenues are anticipated to have witnessed year-over-year growth.
In the last reported quarter, this real estate investment trust (REIT) posted normalized FFO of 65 cents per share, surpassing the Zacks Consensus Estimate of 63 cents. Results mirrored decent organic volume trends and positive contribution from revenue management across all geographies. However, Service revenues were negatively impacted by paper prices.
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 1.18%. This is depicted in the graph below:
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’s storage business is largely insulated from the impacts of the coronavirus pandemic since revenues from the segment are generated from boxes that are already in storage. Notably, with strong box retention, the company enjoys a steady stream of recurring revenues from its core storage and record management businesses. This is expected to have supported Iron Mountain’s organic revenue growth for the first quarter.
The Zacks Consensus Estimate for quarterly storage revenues is pinned at $675 million, indicating year-over-year growth of 1.8%. Segmental revenue growth is expected to drive net operating income (NOI) growth of 3.2% to $545 million.
We believe that the company’s initiatives to strengthen its core storage business will lead to year-over-year revenue growth of 3.16% to $1.09 billion.
Additionally, Iron Mountain is expected to have reaped benefits of its expansion efforts in its data center segment. Notably, data-center wins and decent leasing pipeline are expected to have supported the company’s data-center platform. The Zacks Consensus Estimate for the global data-center business’ quarterly revenues is pinned at $69 million, suggesting flat revenues with the year-ago reported figure.
Further, there was a sharp increase in shredded paper prices in the latter part of the quarter due to strong demand. Since Iron Mountain sells the shredded paper, higher price is expected to have supported revenuesin the Shredding Services segment.
This is also expected to have offset the impacts of shredding-services volume decline due to shrinking paper needs and anticipated low bin tips.
However, persistently declining records and information management volumes in North America have resulted in aggressive pricing. This is expected to have impacted the company’s revenues from its service segment. Notably, the Zacks Consensus Estimate for first-quarter 2020 adjusted service revenues is pinned at $385 million and reflects a sequential decline of 3.3%.
Lastly, prior to the first-quarter earnings release, the Zacks Consensus Estimate for the company’s first-quarter FFO per share remained unchanged at 45 cents over the past month. It suggests a year-over-year decline of 6.25%.
Our proven model does not 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
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Extra Space Storage Inc. EXR, slated to release first-quarter earnings on May 6, has an Earnings ESP of +0.21% and a Zacks Rank of 3 at present.
SBA Communications Corporation SBAC, set to report quarterly numbers on May 5, currently has an Earnings ESP of +0.67% and a Zacks Rank of 3.
Americold Realty Trust COLD, expected to release earnings results on May 7, currently has an Earnings ESP of +9.74% and a Zacks Rank #3.
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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