What's in the Offing for Iron Mountain (IRM) in Q1 Earnings?

Iron Mountain Inc. IRM is set to release first-quarter 2018 results on Apr 26, before the market closes.

Last quarter, this real estate investment trust’s (REIT) normalized funds from operations (FFO) of 53 cents per share lagged the Zacks Consensus Estimate of 57 cents. Nonetheless, fourth-quarter 2017 revenues of $991 million improved 6.1% year over year.

Over the preceding four quarters, the company missed the FFO per share estimates in three occasions and beat in the other, resulting in an average negative surprise of 2.23%. This is depicted in the graph below:

Iron Mountain Incorporated Price and EPS Surprise
 

Iron Mountain Incorporated Price and EPS Surprise | Iron Mountain Incorporated Quote

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Iron Mountain’s focus on setting up data-center businesses bodes well for the company.  Internal storage rental growth rate for 2018 is expected in the 3-3.5% range, backed by volume growth and pricing improvement. We believe stellar organic growth and the company’s initiatives to expand its core storage business will benefit the first-quarter results.

In fact, the Zacks Consensus Estimate for storage rentals from North- America data management of $72 million indicates a sequential increase of 4.3%. Likewise, the consensus estimate for storage rentals from Western European business of $80 million reflects an increase of 1.3% from the previous quarter.

In addition, the company’s service revenues, which comprise charges for related core service activities and a wide array of complementary products and services, are also expected to moderately improve sequentially. Service revenues from its North American records and information management business will likely be up 0.5% moderately, while the same from the Western Europe business is anticipated to rise nearly 2%.  

Nonetheless, Iron Mountain has grown its business principally through acquisitions, which have affected its balance sheet in the form of a high level of goodwill. Hence, a highly leveraged balance sheet is predicted to limit any robust margin improvement.

In the past six months, the company has underperformed the industry it belongs to.  The stock has dipped 16.5%, while the industry incurred a loss of 9.8% during this time frame.

 

Earnings Whispers

Our proven model does not conclusively show that Iron Mountain is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Iron Mountain’s Earnings ESP is 0.00%.

(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.)

Zacks Rank: Iron Mountain carries a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of the earnings beat.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider as our model shows that these have the right combination of elements to report a positive surprise this quarter:

PS Business Parks, Inc. PSB, slated to release first-quarter results on Apr 24, has an Earnings ESP of +0.67% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank  stocks here

Taubman Centers, Inc. TCO, scheduled to report earnings on Apr 26, has an Earnings ESP of +0.47% and a Zacks Rank of 3.

Simon Property Group, Inc. SPG, set to release quarterly numbers on Apr 27, has an Earnings ESP of +0.50% and a Zacks Rank #3.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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