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What's in Store for Iron Mountain (IRM) in Q1 Earnings?

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Iron Mountain Incorporated IRM is set to release first-quarter 2021 results on May 6, before the opening bell. The company’s quarterly funds from operations (FFO) per share are expected to have improved year over year, while revenues are likely to have declined.

In the last reported quarter, the real estate investment trust (REIT) posted adjusted FFO (AFFO) per share of 66 cents, which surpassed the Zacks Consensus Estimate of 60 cents. Continued resilience in the company’s core storage business aided results. However, the service segment‘s performance was disappointing.

The company surpassed FFO per share estimates in each of the trailing four quarters, the average surprise being 19.55%. This is depicted in the graph below:

Iron Mountain Incorporated Price and EPS Surprise

Iron Mountain Incorporated Price and EPS Surprise
Iron Mountain Incorporated Price and EPS Surprise

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

Factors to Note

Escalating growth of data, rapid accelerations in cloud adoption and the boom in IT outsourcing demand have been driving the demand for data-center space. Moreover, new technologies like 5G and augmented reality have been creating opportunities for edge deployments and data center operators.

The strong demand for connectivity, interconnection and colocation space is expected to have driven data-center leasing activity for Iron Mountain. Also, amid the favorable backdrop, the company has continued its portfolio expansion and data center enhancement efforts in the quarter under review, thereby, driving revenues from the global data-center business.

Accordingly, the Zacks Consensus Estimate for first-quarter revenues from the global data-center business is pegged at $73 million, indicatingan improvement from the year-ago reported figure of $67 million.

Also, a steady stream of recurring revenues from its core storage and record management businesses is expected to have benefited Iron Mountain in the first quarter. In fact, the company 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. This along with high box retention rate is anticipated to have rendered storage rental revenue stability.

Markedly, the consensus estimate for the same for the first quarter is peggedat $787 million, suggesting a 3.4% improvement from the year-ago reported figure.

Additionally, the company has been focusing on expanding operations in international markets, specifically, emerging ones. Notably, by scaling up its emerging market platform, it is likely to have witnessed an accelerated EBITDA growth rate in the first quarter.

However, anticipated headwinds in the data storage business are expected to have continued amid rampant shifts in data storage to non-paper-based technologies. This is expected to have hindered physical storage volume and the demand for the handling of records, denting record-management volume and service activity levels, leading to organic service revenue declines. Also, lower volumes are expected to have led to aggressive pricing and hindered margins in the quarter under review.

Apart from this, no significant turnaround is expected for demand for its core service offerings as its customers have likely continued operating at significantly lower capacities amid the pandemic-led restrictions.

Notably, the consensus estimate for first-quarter service revenues is pegged at $360 million, which indicates a decline of 0.5% from the prior quarter’s reported figure.

In addition, given Iron Mountain’s international footprint, the company is likely to have faced unfavorable foreign-currency movements, which is anticipated to have affected its top-line growth.

Overall, total revenues for the first quarter are pegged at $1.06 billion and the figure indicates a year-over-year decline of 1%.

Iron Mountain’s activities in the first quarter were inadequate to gain analyst confidence. The Zacks Consensus Estimate of 64 cents for quarterly FFO per share has been unrevised over the past month. Nonetheless, the figure suggests year-over-year growth of 8.5%.

Earnings Whispers

Our proven model does not conclusively predict a 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:

Summit Hotel Properties, Inc. INN, set to report quarterly numbers on May 4, currently has an Earnings ESP of +8.57% and a Zacks Rank of 3.

Healthcare Trust of America, Inc. HTA, slated to release earnings figures on May 6, has an Earnings ESP of +0.33% and a Zacks Rank of 3 at present.

National Storage Affiliates Trust NSA, slated to release earnings figures on May 4, has an Earnings ESP of +1.84% and a Zacks Rank of 3, currently.

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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Iron Mountain Incorporated (IRM) : Free Stock Analysis Report

Summit Hotel Properties, Inc. (INN) : Free Stock Analysis Report

Healthcare Trust of America, Inc. (HTA) : Free Stock Analysis Report

National Storage Affiliates Trust (NSA) : Free Stock Analysis Report

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