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It has been about a month since the last earnings report for Iron Mountain (IRM). Shares have added about 6.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is 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 Q3 FFO Tops Estimates, Revenues Fall Y/Y
Iron Mountain reported third-quarter 2020 normalized FFO per share of 61 cents, which beat the Zacks Consensus Estimate of 55 cents. However, the reported figure was 1.5% lower than the year-ago quarter’s 62 cents.
Revenues of $1.04 billion declined 2.1% year over year. However, the top line outpaced the Zacks Consensus Estimate of $991.3 million.
Results reflect strength in the company’s core storage business. However, the service segment‘s performance was disappointing due to the coronavirus outbreak-led concerns.
Adjusted FFO (AFFO) decreased 4.5% year over year to $213 million.
Storage revenues were $696 million in the September-end quarter, highlighting a 3.8% year-over-year increase on a constant-currency basis. The company recorded 2.5% organic growth year over year.
Service revenues amounted to $340 million in the reported quarter, indicating a year-over-year fall of 12.2% on a constant-currency basis. Further, organic service revenues declined 13.5% year over year.
Adjusted EBITDA margin expanded 30 basis points (bps) to 35.7%.
The company exited the third quarter with $152 million of cash and cash equivalents, down from $193.6 million at 2019 end.
As of the third-quarter end, the company had total liquidity of $1.7 billion.
Project Summit Update
Iron Mountain’s transformation program — Project Summit — focuses on simplifying global structure, streamlining managerial structure and enhancing customer experience.
Project Summit is anticipated to deliver annual adjusted EBITDA benefits of $375 million exiting 2021. The total cost to implement the program is estimated to be approximately $450 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
Currently, Iron Mountain has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 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 upward for the stock, and the magnitude of these revisions looks promising. 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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