Key Reasons to Add Iron Mountain (IRM) Stock to Your Portfolio
Iron Mountain Incorporated IRM is well-poised to benefit from its stable and resilient core storage and records management businesses. It derives the majority of its revenues from fixed periodic (usually earned on a monthly basis) storage rental fees charged to customers based on the volume of their records stored. With continued momentum in positive volume trends and strong pricing, we expect the company’s revenues to remain stable, aiding its top-line growth.
Moreover, IRM’s diversified tenant and revenue base is encouraging. It serves around 225,000 clients across different industries and locations, and no single customer accounted for more than 1% of its revenues in 2022.
Iron Mountain’s Project Matterhorn, launched in September 2022, aims to capture a higher share of the large, global addressable markets by investing 16% of its revenues (roughly $4 billion) over the next four years. This is expected to propel growth meaningfully.
Further, to supplement its storage segment performance, IRM has been focusing on expanding its faster-growing businesses, especially the data center segment. Also, strong demand for connectivity, interconnection and colocation space has been driving leasing activity in this space. In the first quarter of 2023, it leased 52 megawatts of data center capacity. For 2023, management expects to lease 80 megawatts or more.
Through acquisitions and developments, IRM has expanded its operations in the international markets and scaled up its emerging market platform. This is likely to accelerate the EBITDA growth rate in the near future. We project adjusted EBITDA to increase 6.8% in 2023.
On the balance sheet front, Iron Mountain had around $1 billion of total liquidity as of Mar 31, 2023. Its net total lease-adjusted leverage was 5.1X as of first-quarter 2023 end, the lowest since 2017. Moreover, the company has no significant debt maturities until 2027. With ample financial flexibility, IRM is well-poised to capitalize on long-term growth opportunities.
Additionally, its trailing 12-month return on equity is 88.48% compared with the industry’s average of 3.77%. This reflects that the company is more efficient in using shareholders’ funds than its peers.
Shares of this Zacks Rank #2 (Buy) company have gained 1.3% in the quarter-to-date period against its industry’s decline of 6%.
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However, the company has a significant international presence, which often subjects it to adverse foreign currency translations. This could adversely impact its top-line growth.
Also, a high interest rate environment could raise the company's borrowing costs, affecting its ability to purchase or develop real estate. Our estimate for 2023 interest expense indicates a rise of 16.3% year over year.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Rexford Industrial Realty REXR, Stag Industrial STAG and Innovative Industrial Properties IIPR, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Rexford Industrial’s current-year funds from operations (FFO) per share has moved 1.4% northward over the past two months to $2.19.
The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share has been raised marginally upward over the past month to $2.25.
The Zacks Consensus Estimate for Innovative Industrial Properties’ 2023 FFO per share has moved 3.6% upward in the past month to $8.66.
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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