It has been about a month since the last earnings report for Digital Realty Trust (DLR). Shares have added about 0.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Digital Realty Trust due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Digital Realty Q1 FFO and Revenues Beat Estimates
Digital Realty’s first-quarter 2019 core FFO per share of $1.73 outpaced the Zacks Consensus Estimate of $1.65. The figure also comes in higher than the year-ago tally of $1.63.
The company reported operating revenues of $814.5 million in the first quarter, which marked a 9.4% year-over-year rise. The revenue figure also surpassed the Zacks Consensus Estimate of $797.4 million. The company has reaffirmed its 2019 core FFO per share outlook.
Signed total bookings during the reported quarter are estimated to generate $50 million of annualized GAAP rental revenues. This would include a $9-million from Ascenty (at 100% share) and a $7-million contribution from interconnection. Notably, the weighted-average lag between leases signed during first-quarter 2019 and the contractual commencement date was two months.
Moreover, the company signed renewal leases, marking $116 million of annualized GAAP rental revenues. Rental rates on renewal leases signed during the quarter rolled down 6.9% on a cash basis and ascended 7.1% on a GAAP basis.
Notable Portfolio Activity
During the March-end quarter, Digital Realty announced the conclusion of its joint venture (JV) deal with Brookfield Asset Management’s affiliate — Brookfield Infrastructure. The move comprised Brookfield investing approximately $700 million and in turn, acquiring around 49% of the total equity interests in the JV, which owns and operates Ascenty.
Moreover, during the first quarter, Digital Realty closed the 30-year ground lease with Jurong Town Council for two adjacent land parcels in Singapore, aggregating three acres, for an upfront payment of around $6 million.
Further, in an effort to expand its presence in Japan, Digital Realty announced that its 50/50 JV with Mitsubishi Corporation — MC Digital Realty — has signed a deal to acquire a five-acre land parcel in Tokyo.
Digital Realty exited first-quarter 2019 with cash and cash equivalents of around $123.9 million, slightly down from $126.7 million recorded at year-end 2018.
Additionally, as of Mar 31, 2019, the company had around $10.3 billion of total debt outstanding, of which $10.2 billion was unsecured debt and around $0.1 billion secured debt. Also, as of the same date, its net debt-to-adjusted EBITDA was 5.5x, while fixed charge coverage was 3.6x.
Digital Realty reiterated its 2019 core FFO per share outlook at $6.60-$6.70. The full-year outlook provided by the company is backed by revenue projections of $3.2-$3.3 billion, year-end portfolio occupancy growth of +/- 50 bps, and "same-capital" cash NOI growth of -2.0% to -4.0%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Digital Realty Trust has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Digital Realty Trust has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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