It has been about a month since the last earnings report for Iron Mountain (IRM). Shares have added about 3.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Iron Mountain 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 drivers.
Iron Mountain Q2 FFO & Revenues Surpass Estimates
Iron Mountain reported second-quarter 2019 normalized FFO per share of 54 cents, beating the Zacks Consensus Estimate of 51 cents. However, the reported figure compares unfavorably with the year-ago quarter’s 58 cents.
Results reflect lower recycled paper prices in the company’s Secure Shred business compared with the prior year. Further, adjusted FFO (AFFO) fell 8.1% year over year to $209.6 million.
Revenues of $1.07 billion outpaced the Zacks Consensus Estimate of $1.06 billion. The reported figure, also improved 0.6% year over year.
Storage rental revenues came in at $669 million in the second quarter, highlighting a 2.1% year-on-year increase. The company recorded 2.4% organic growth, year over year. In developed markets, storage organic revenue growth came in at 1.3%, while in Other International markets, storage organic revenues were up 3.7% year over year.
Service revenues amounted to $397.6 million in the reported quarter, indicating a year-over-year decline of 1.9%. Service organic revenue growth in developed markets declined 2.1%, while in Other International markets, the figure was down 2%.
Adjusted EBITDA margin shrunk 170 basis points (bps) to 32.9%, suggesting higher costs. The company registered a 10-basis point expansion in North America Records and Information management (RIM) and a 30-basis point increase in Other International segments adjusted EBITDA margin. However, a 30-basis point contraction in Western Europe, 20-basis point decline in North America Data Management, 120-basis point fall in Corporate and Other, and a 100-basis point slip in Global Data Center segments adjusted EBITDA margin dented results.
Iron Mountain revised its guidance for 2019. Particularly, the company projects revenues at $4,250-$4,325 million compared with the prior outlook of $4,200-$4,400 million, and adjusted EBITDA of $1,440-$1,480 as compared with the previously estimate of $1,420-$1,530 million. Further, AFFO is estimated to be in the range of $870-$900 million as compared with $870 - $930 million earlier projected.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
At this time, Iron Mountain has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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, Iron Mountain has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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