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Digital Realty (DLR) Q1 FFO Beats Estimates, Revenues Up Y/Y

Published 04/27/2017, 10:52 PM
Updated 07/09/2023, 06:31 AM

Digital Realty Trust, Inc.’s (NYSE:DLR) first-quarter 2017 funds from operations (“FFO”) per share of $1.50 came 7.9% higher than the year-ago tally of $1.39. Further, core FFO per share of $1.52 exceeded the year-ago quarter tally of $1.42 by 7.0%. The Zacks Consensus Estimate for the quarter was pegged at $1.47. Results were driven by growth in revenues.

The company reported revenues of $550.6 million for the first quarter, reflecting a 9.2% increase year over year. The revenue figure also marginally surpassed the Zacks Consensus Estimate of $550.4 million.

Quarter in Detail

During the first quarter, the company signed total bookings which represented $50 million of annualized GAAP rental revenue, including a $9 million contribution from interconnection. Notably, the weighted-average lag between leases signed during first-quarter 2017 and the contractual commencement date was three months.

Moreover, the company signed renewal leases denoting $46 million of annualized GAAP rental revenue. Rental rates on renewal leases signed during the reported quarter rolled up 3.1% on a cash basis and expanded 4.5% on a GAAP basis.

Notably, during the quarter, the company acquired a seven-acre land parcel next to its existing development project in Osaka, Japan, for $13.6 million. The location is expected to support the development of 25 megawatts of critical power.

Balance Sheet

Digital Realty exited the first quarter with cash, cash equivalents of around $15.0 million, up from $10.5 million at year-end 2016.

Further, as of Mar 31, 2017, the company had around $6.2 billion of total debt outstanding, substantially all of which was unsecured. Also, as of the same date, the company’s net debt-to-adjusted EBITDA was 4.9x, while fixed charge coverage was 4.2x.

Outlook

Digital Realty raised its 2017 core FFO per share outlook to $5.95–$6.10 from the prior guided range of $5.90–$6.10. This is backed by revenue expectations of $2.2–$2.3 billion, year-end portfolio occupancy growth of +/- 50 bps and "same-capital" cash NOI growth of 2.0–3.0%.

The Zacks Consensus Estimate for the same is currently pegged at $6.02.

Our Take

Digital Realty is poised to ride on the growth curve backed by robust fundamentals of the data center market. The company’s business has significantly grown since its launch. Further, its accretive acquisitions and development efforts augur well for long-term growth. However, exposure of earnings to foreign currency translation, cut-throat competition in the industry and a substantial debt burden remain concerns.

Digital Realty currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Digital Realty Trust, Inc. Price, Consensus and EPS Surprise

Digital Realty Trust, Inc. Price, Consensus and EPS Surprise | Digital Realty Trust, Inc. Quote

We are now looking forward to the earnings releases of GGP Inc. (NYSE:GGP) , Vornado Realty Trust (NYSE:VNO) and HCP Inc. (NYSE:HCP) , all of which are expected to report earnings in the next week.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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General Growth Properties, Inc. (GGP): Free Stock Analysis Report

HCP, Inc. (HCP): Free Stock Analysis Report

Vornado Realty Trust (VNO): Free Stock Analysis Report

Digital Realty Trust, Inc. (DLR): Free Stock Analysis Report

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