Dj Crown Castle Inc. Stock Underperforms Wednesday When Compared To Competitors Despite Daily Gains

Shares of Simon Property SPG have rallied 16.9% over the past three months, outperforming the industry's 7.1% growth.

The retail real estate investment trust’s (REIT) portfolio of premium retail assets in the United States and abroad, the adoption of omnichannel retailing, a focus on strategic acquisitions and mixed-use developments and solid balance sheet strength have enabled it to ride the growth curve so far.

In early November, SPG reported third-quarter funds from operations (FFO) per share of $2.84, missing the Zacks Consensus Estimate of $3. The figure decreased from $3.20 reported in the year-ago period.

Factors Behind SPG Stock’s Price Surge: Will the Trend Last?

Simon Property enjoys wide exposure to retail assets across the United States. The company’s international presence fosters sustainable long-term growth compared to its domestically-focused peers. In an improving leasing environment, the retail REIT is poised to benefit from its superior assets at premium locations. As of Sept. 30, 2024, the ending occupancy for the U.S. Malls and Premium Outlets portfolio came in at 96.2%, up 100 basis points from 95.2% as of Sept. 30, 2023.

Simon Property’s adoption of an omni-channel strategy and successful tie-ups with premium retailers have paid off well. Its online retail platform, coupled with an omnichannel strategy, is likely to be accretive for its long-term growth. The company is also focused on tapping its growth opportunities by assisting digital brands in enhancing their brick-and-mortar presence.

Simon Property has been restructuring its portfolio, aiming at premium acquisitions and transformative redevelopments. In September 2024, it concluded the expansion and renovation of Busan Premium Outlets in South Korea. This move, along with past restructuring initiatives, is likely to bolster the company’s growth in the upcoming period. Its efforts to explore the mixed-use development option, which has gained immense popularity in recent years, have enabled it to tap the growth opportunities in areas where people prefer to live, work and play.

SPG is making efforts to bolster its financial flexibility. This enabled the company to exit the third quarter of 2024 with $11.1 billion of liquidity. As of Sept. 30, 2024, Simon Property’s total secured debt to total assets was 17%, while the fixed-charge coverage ratio was 4.3, ahead of the required level. With solid balance sheet strength and available capital resources, it remains well-poised to tide over any mayhem and bank on growth opportunities.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Simon Property remains committed to that. Concurrent with its third-quarter earnings release, the company announced a hike in its dividend to $2.10 from $2.05 paid out earlier. This marked a hike of 2.4% from the prior dividend payment and a year-over-year increase of 10.5%. This retail REIT has increased its dividend 12 times in the last five years. Such disbursements highlight its operational strength and commitment to rewarding shareholders handsomely.

Key Risks for SPG

Higher e-commerce adoption and limited consumers’ willingness to spend amid macroeconomic uncertainty raise concerns for Simon Property.

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

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Crown Castle Inc. CCI and SL Green Realty SLG,each carrying a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Crown Castle Inc.’s ongoing year’s FFO per share has increased marginally over the past month to $6.98.

The Zacks Consensus Estimate for SL Green Realty’s 2024 FFO per share has moved marginally northward in the past two months to $7.61.

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.

Zacks Investment Research

Houston-based Crown Castle Inc. is a top-tier real estate investment trust (REIT) focused on cell towers and fiber network infrastructure. With a market cap of $46 billion, Crown Castle manages an extensive portfolio of over 40,000 cell towers and approximately 90,000 route miles of fiber, delivering small-cell and fiber solutions across all major U.S. markets.

Shares of the leading REIT have underperformed the broader market over the past year. CCI has gained 9.5% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 36.8%. In 2024, CCI stock is down 8.1%, compared to the SPX’s 25.7% returns on a YTD basis.

Narrowing the focus, CCI has also lagged behind the Real Estate Select Sector SPDR Fund over the past year. The exchange-traded fund has gained 27.1% over the past year and 9.6% in 2024.

In a world where digital transformation is paramount, Equinix EQIX continues to prove itself to be a pivotal player in the global digital infrastructure landscape.

Analysts also seem bullish on this Zacks Rank #2 (Buy) stock. The estimate revision trend for 2024 funds from operations (FFO) per share indicates a favorable outlook for the company, with estimates moving north over the past month.

Over the past three months, shares of Equinix have risen 11%, outperforming the real estate market’s upside of 4.6%. Given its solid fundamentals and positive estimate revisions, the stock is likely to keep performing well in the quarters ahead.

What Makes Equinix a Solid Pick?

Solid Market Fundamentals and Recurring Revenues: Enterprises and service providers’ continued efforts to integrate artificial intelligence (AI) into their strategies and offerings and advance their digital transformation agendas are likely to keep demand up in the near term. Amid this, Equinix’s geographically diverse portfolio of IBX data centers is expected to benefit from enterprises’ increasing dependence on technology and the expedited implementation of digital transformation strategies.

Its business generates a substantial portion of monthly recurring revenue bookings (greater than 90% of total revenues in the last three years) from existing customers. The company generated 36% of the recurring revenues from its 50 largest customers during the three and nine months ended Sept. 30, 2024. Given the growing demand for data exchanges worldwide, Equinix is well-poised to grow its revenue base. Higher revenues, along with lower costs, will expand margins and increase profitability in the long run.

Portfolio Strength: Equinix has been achieving continued business momentum with its critical mass of customers and the resultant “network effect” within its IBX centers. Direct interconnection with its networks, connecting the majority of the world’s Internet routes, enables customers to increase the efficiency of their IT infrastructure, remove complexities associated with infrastructure administration and management and reduce costs. The benefits provided by the Platform Equinix have led to a loyal and blue-chip customer base.

Through its 268 IBX data centers in 73 metros across 34 countries, customers can connect and satisfy their critical traffic exchange requirements. These customers rely on Equinix's IBX centers for their critical interconnection relationships.

Expansion Efforts: Equinix continues focusing on acquisitions and developments to expand data center capacity in key markets and strengthen its competitive positioning and global reach. In October 2024, Equinix entered into a joint venture (JV) agreement, subject to closing conditions, in the form of a limited liability partnership with GIC and the Canada Pension Plan Investment Board (CPP Investments). The JV seeks to enhance the Equinix xScale data center portfolio, which enables hyperscale companies to expand their core deployments into their existing access point footprints at Equinix IBX data centers.

Moreover, Equinix has an encouraging development pipeline. As of the end of the third quarter of 2024, it had 57 major builds underway across 35 markets in 22 countries, including 13 xScale builds representing more than 22,000 cabinets of retail capacity and more than 100 megawatts of xScale capacity through the end of 2025.

Balance Sheet Strength: Equinix’s robust balance sheet position enables it to capitalize on long-term growth opportunities. As of Sept. 30, 2024, the company’s liquidity totaled $7.2 billion. Moreover, it enjoyed investment-grade credit ratings of Baa2 from Moody’s, BBB rating from S&P Global Ratings and BBB+ from Fitch Ratings as of the end of the third quarter of 2024, rendering it favorable access to the debt market.

Dividend: Solid dividend payouts remain the biggest attraction for REIT investors, and Equinix has remained committed to that. Moreover, Equinix has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 12.02%. Given a robust operating platform, healthy financial position and a lower dividend payout (compared to its industry), its dividend distribution is expected to be sustainable over the long run.

Other Stocks to Consider

Some other top-ranked stocks from the REIT sector are Crown Castle Inc. CCI and Iron Mountain Incorporated IRM, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Crown Castle’s current-year FFO per share has been revised marginally upward over the past month to $6.98.

The Zacks Consensus Estimate for Iron Mountain’s 2024 FFO per share has moved a cent upward in the past month to $4.49.

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.

Zacks Investment Research

Iron Mountain Incorporated IRM reported third-quarter 2024 adjusted funds from operations (AFFO) per share of $1.13, beating the Zacks Consensus Estimate of $1.11.

Results reflect solid performances in the storage and service segments and the data center business. However, higher interest expenses in the quarter acted as a dampener. The company reaffirmed its outlook for 2024.

Quarterly total revenues of $1.56 billion surpassed the Zacks Consensus Estimate by just 0.06%.

On a year-over-year basis, AFFO per share and total revenues increased 10.8% and 12.2%, respectively.

According to William L. Meaney, president and CEO of Iron Mountain, “We are pleased to report a very strong third quarter and continued strong momentum in the second half of 2024, resulting in all-time record Revenue, Adjusted EBITDA, and AFFO.”

Behind the Headlines

Storage rental revenues were $935.7 million in the third quarter, up 9% year over year. We had estimated quarterly storage rental revenues to be $935.6 million.

Service revenues increased 17.4% from the prior-year quarter to $621.7 million.

The Global Data Center business reported revenues of $153.2 million in the third quarter, rising 20.1% year over year. Our estimate was pegged at $156 million.

The adjusted EBITDA rose 13.6% year over year to $568.1 million. The adjusted EBITDA margin came at 36.5%, increasing 50 basis points year over year.

However, interest expenses flared up 21.8% year over year to $186.1 million in the quarter. We projected the metric to be $178 million.

Balance-Sheet Position

IRM exited the third quarter with $168.5 million of cash and cash equivalents, up from $144.3 million as of June 30, 2024.

Dividend Update

Concurrently, IRM announced a quarterly cash dividend of 71.5 cents per share for the fourth quarter of 2024. The dividend will be paid out on Jan. 7, 2024, to its shareholders on record as of Dec. 16, 2024.

2024 Guidance

Iron Mountain reaffirmed its guidance for 2024 and now expects to be on track to achieve the upper end of the 2024 guidance range.

It expects AFFO per share of $4.39-$4.51. The Zacks Consensus Estimate for the same is pegged at $4.49, which lies within the company’s guided range.

Revenues are estimated to be $6.00-$6.15 billion, while adjusted EBITDA is anticipated to be $2.175-$2.225 billion.

Iron Mountain currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Iron Mountain Incorporated Price, Consensus and EPS Surprise

Iron Mountain Incorporated price-consensus-eps-surprise-chart | Iron Mountain Incorporated Quote

Performance of Other REITs

Prologis, Inc. PLD reported third-quarter 2024 core funds from operations (FFO) per share of $1.43, outpacing the Zacks Consensus Estimate of $1.37. This compares favorably with the year-ago quarter’s figure of $1.30.

The quarterly results reflected a rise in rental revenues and healthy leasing activity. However, high interest expenses are an undermining factor. In addition, PLD increased its 2024 core FFO per share guidance range.

Crown Castle Inc. CCI reported third-quarter 2024 AFFO per share of $1.84, outpacing the Zacks Consensus Estimate of $1.80. The reported figure also increased by 4% from the year-ago quarter.

Results reflected a rise in site rental revenues and a decline in total operating expenses year over year. However, a decrease in services and other revenues affected the results to some extent. CCI maintained its outlook for 2024.

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.

Zacks Investment Research