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Iron Mountain (IRM) to Report Q4 Earnings: What to Expect?

Zacks Equity Research

Iron Mountain Inc. IRM is set to release fourth-quarter 2018 results on Feb 14, before the market opens. The company’s results will likely reflect year-over-year growth in revenues and a decline in funds from operations (FFO) per share.

In the last reported quarter, this real estate investment trust’s (REIT) normalized FFO of 55 cents per share surpassed the Zacks Consensus Estimate of 54 cents. Results reflected decent internal storage rental revenues and margin expansion. Further, adjusted FFO increased 8.8% year over year to $229 million.

Over the preceding four quarters, the company missed the FFO per share estimates in two occasions for as many beats, resulting in average negative surprise of 0.38%. This is depicted in the graph below:

Iron Mountain Incorporated Price and EPS Surprise
 

Iron Mountain Incorporated Price and EPS Surprise | Iron Mountain Incorporated Quote

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

Factors to Consider

In the quarter under review, Iron Mountain continued expanding its footprint in targeted markets. This included the purchase of Valex Security’s information-management operations in South Korea and GRM's Chinese operations which expanded its presence in Beijing, Shanghai, Guangdong, Qingdao, Dalian, Chengdu and Wuhan.

These efforts will likely bolster the company’s top-line performance in the Dec-end quarter. In fact, its adjusted service revenues for the fourth quarter are estimated to be $402 million, improving nearly 8.4% on a year-over-year basis.

Further, Iron Mountain hiked its fourth-quarter cash dividend by 4% sequentially. The increase reflects that the company likely enjoyed consistent cash flows during the Oct-Dec quarter.

However, moderating volumes in data management will continue to impact the company’s fourth-quarter 2018 performance. Also, the company might witness lower internal volume growth in its North American record-management segment.  

Amid these, the Zacks Consensus Estimate for quarterly storage rental revenues from the North American data-management segment is expected to decline to $68 million year over year. Furthermore, total revenues from its data-management operations in North America are pinned at $96 million and represent a year-over- year decline of 4%.  

Also, total revenues from its North America records and information-management segment are expected to remain flat at $540 million.

Lastly, prior to the fourth-quarter earnings release, the company has been witnessing downward estimate revisions. As such, the Zacks Consensus Estimate of FFO per share for the quarter under review has been revised marginally downward to 52 cents over the past month, reflecting analysts’ bearish sentiments. Also, it represents a year-over-year decline of 1.9%.

Earnings Whispers

Our proven model does not conclusively show that Iron Mountain is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. 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.

Earning ESP: Iron Mounitan’s Earnings ESP is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 4 (Sell), which decreases the predictive power of ESP.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Hersha Hospitality Trust HT, scheduled to release earnings on Feb 25, has an Earnings ESP of +3.81% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sabra Health Care REIT, Inc. SBRA, slated to release fourth-quarter results on Feb 24, has an Earnings ESP of +5.49% and a Zacks Rank of 3.

American Tower Corporation AMT, set to release earnings on Feb 27, has an Earnings ESP of +0.29% and carries a Zacks Rank of 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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