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Iron Mountain's Rating Affirmed, Outlook Upgraded by Moody's

Zacks Equity Research

Iron Mountain Incorporated’s IRM ratings have been reiterated by Moody’s Investors Service — the rating division of Moody’s Corporation MCO. Additionally, the company’s rating outlook has been revised to stable from negative. 

Specifically, the rating agency affirmed the corporate family rating (CFR) of Iron Mountain at Ba3. The rating for the company’s existing senior and subordinate debt have also been maintained at Ba3 and B2, respectively.

Why has the Outlook been Upgraded?

The reiteration of the rating and the outlook revision reflect the company’s geographically-diversified and large-scale property portfolio. In addition, leading market position in the North American storage and information management market as well as significant amount of recurring storage rental revenues were the key reasons which led to the outlook upgradation.

Strategic acquisitions in the secure storage space and higher investments in its global data-center business have enabled the company to expand the portfolio size and scale in recent years. In fact, Iron Mountain’s gross asset base on a book value basis, has increased from $10 billion at year-end 2014 to nearly $16.9 billion (Moody's adjusted) as of first-quarter 2019.

Further, the rating agency views Iron Mountain's leverage and coverage metrics to be strong, relative to other real estate investment trust (REIT) peers. Moreover, adequate liquidity, decent balance in its secured revolving credit facility and a well-laddered debt profile also remain positives for the company. 

The stable outlook underpins Moody's expectation that Iron Mountain will continue to expand and diversify its portfolio, and gradually lower leverage levels.

Conclusion

This upgraded outlook boosts Iron Mountain’s creditworthiness in the market and is likely to boost investor confidence in the stock. In fact, such moves provide companies an opportunity to enjoy favorable costs on debts and solid access to capital, and are therefore encouraging. 

However, the competitive landscape of the storage and information management services industry is anticipated to result in aggressive pricing, which may adversely impact Iron Mountain’s margins in the near term. Also, falling activity rates and the projected decline in recycled paper prices will hinder the company’s top-line growth. 

Furthermore, shares of this Zacks Rank #4 (Sell) company have declined 12.6% over the past three months as against the industry’s growth of 1.3%. 

 

Key Picks

Investors can consider better-ranked stocks from the same space like Host Hotels & Resorts, Inc. HST and Lamar Advertising Co. LAMR, both carrying a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Host Hotels & Resorts’ funds from operations (FFO) per share estimates for 2019 moved marginally north to $1.82 over the past two months.

Lamar Advertising’s FFO per share estimates for the ongoing year have been revised slightly upward to $5.83 over the past 30 days.

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