Here's Why You Should Retain Iron Mountain (IRM) Stock Now
Iron Mountain Inc.’s IRM continued efforts to transition from a core storage and record management business to owning a decent data-center portfolio will diversify its revenue mix. However,paper needs are shrinking at the enterprise level, thereby, reducing the demand for handling of records.
In fact, amid the favorable macro trend for data centers, the company has been active on this front on the back of acquisitions and developments. Earlier this month, it collaborated with an affiliate of AGC Equity Partners (AGC), a London-based global alternative asset manager, for the creation of a more than 300-million Euro joint venture to develop and manage the 27 megawatts, hyperscale data center in Frankfurt. Iron Mountain will own a 20% equity stake in the venture, per the terms of the agreement.
Additionally, it aims for the data center business to account for 10% of the total adjusted EBITDA by the end of 2020. As such, the efforts will diversify the company’s revenue mix and improve adjusted EBITDA margins.
Moreover, the company is restructuring its global business through a transformation program, Project Summit. Through this, it aims to simplify its global structure by combining core records and information management operations under one segment, delver, and streamline managerial structures. Further, by reducing managerial and administrative personnel, it aims to improve adjusted EBITDA by approximately $150 million in 2020. Such efforts are likely to help the company’s profitability grow over the long term.
Moreover, Iron Mountain has an aggressive acquisition strategy to supplement organic growth in storage revenues. The company has not only gained new customers from the acquisitions but has also been able to expand operations in international markets, specifically, emerging markets.
Its decent balance sheet and ample financial flexibility also support such moves.
However, the company’s service activity levels are being affected by a declining physical storage volume and the low demand for handling of records, as hard-copy documentation losses its relevance. This along with the continued weakness in recycled paper prices is hindering organic service revenue growth.
Further, the company’s service business has not been immune to the pandemic-led concerns. In fact, numerous shutdowns of businesses and an increase in remote-working policies across companies have resulted in a slowdown in Iron Mountain’s service business. This is evident from the significant decline in new incoming boxes as well as retrievals and refiles.
In addition, given Iron Mountain’s international footprint, it often faces unfavorable foreign-currency movements. This affects top-line growth.
Shares of this Zacks Rank #3 (Hold) have gained 12.3% over the past six months compared with the industry’s rally of 10.6%.
Stocks to Consider
Sabra Healthcare REIT, Inc.’s SBRA funds from operations (FFO) per share estimates for 2020 have been revised marginally upward to $1.75 over the past month. The company carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Digital Realty Trust, Inc.’s DLR Zacks Consensus Estimate for 2020 FFO per share has been unrevised at $6.08 over the past month. The company currently carries a Zacks Rank of 2.
American Tower Corporation’s AMT Zacks Consensus Estimate for 2020 FFO per share has improved marginally upward to $8.28 in a months’ time. The company has a Zacks Rank of 2, at present.
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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