Iron Mountain (IRM) Tops Q4 FFO Estimate, Misses On Revenues

Iron Mountain Incorporated (NYSE:IRM) reported fourth-quarter 2018 normalized funds from operations (FFO) of 56 cents per share, beating the Zacks Consensus Estimate of 52 cents. The reported figure also compares favorably with the year-ago tally of 53 cents.

Results reflect decent organic growth in storage and services revenues. The company has also issued its outlook for 2019.

Adjusted FFO jumped 25.9% year over year to $194 million.

For full-year 2018, normalized FFO per share came in at $2.30, up 7.9% year over year. It also surpassed the Zacks Consensus Estimate of $2.10. Revenues for 2018 improved 10.2% year over year, on a constant-dollar basis, to $4.23 billion, and were in line with the Zacks Consensus Estimate.

Quarter Details

Revenues of $1.06 billion missed the Zacks Consensus Estimate of $1.07 billion. However, the reported figure improved 9.9% year over year on a constant-dollar basis, reflecting contributions from recent data-center buyouts.

Storage revenues came in at $659 million in the quarter and denoted 9.9% increase on a constant-dollar basis. The company recorded 1.9% organic growth, year over year. In developed markets, storage organic revenue growth came in at 0.9%. In Other International markets, storage organic revenue growth came in at 4.1% year over year.

Service revenues amounted to $402 million in the quarter, indicating an increase of 9.8% on a constant-currency basis. Additionally, it witnessed organic growth of 6.1%, year over year. Service organic revenue growth in developed markets and Other International markets came in at 5.1% and 6.1%, respectively.

Adjusted EBITDA margin expanded 100 basis points (bps) to 33.9%. This year-over-year upside was driven by the robust performance in North America Records and Information management (RIM) and Global Data Center, which advanced 60 bps and 2,050 bps, respectively.

Guidance

Iron Mountain has provided its guidance for 2019. On a constant-dollar basis, the company expects revenues of $4,200-$4,400 million and adjusted FFO to lie between $870 million and $930 million.

Dividend Update

On Feb 5, Iron Mountain announced a first-quarter 2019 common stock cash dividend of 61.10 cents per share. The dividend will be paid on Apr 2 to shareholders of record at the close of business on Mar 15, 2019.

Our Take

In 2018, Iron Mountain made diligent efforts to strengthen its fast-growing businesses on the back of acquisitions. In fact, it expanded its data-center footprint in international markets. Further, key buyouts in South Korea, China and the Philippines have added scale to the company’s RIM business.

Nevertheless, the costs of such efforts weigh on its financials, especially as the company already has a highly leveraged balance sheet. Furthermore, rate hike adds to its woes.

Iron Mountain Incorporated Price, Consensus and EPS Surprise

Iron Mountain currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Ventas, Inc. (NYSE:VTR) reported fourth-quarter 2018 normalized FFO of 96 cents, beating the Zacks Consensus Estimate of 95 cents. However, the figure came in lower than the year-ago tally of $1.03.

Alexandria Real Estate Equities, Inc. (NYSE:ARE) recorded fourth-quarter 2018 adjusted FFO of $1.68 per share, missing the Zacks Consensus Estimate by a whisker.

Boston Properties Inc.’s (NYSE:BXP) fourth-quarter 2018 FFO per share of $1.59 also missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.

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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