Dj Iron Mountain Inc. Stock Underperforms Thursday When Compared To Competitors

Iron Mountain Incorporated IRM is well-poised to benefit from its recurring revenue business model and expansion into the data center business. A healthy balance sheet will likely support its growth endeavors over the long term.

Last week, this Boston, MA-based real estate investment trust (REIT) company reported third-quarter 2024 adjusted funds from operations (AFFO) per share of $1.13, beating the Zacks Consensus Estimate of $1.11. Results reflected solid performances in the storage and service segments and the data center business.

Shares of this Zacks Rank #2 (Buy) company have rallied 40.9% over the past six months, outperforming its industry's growth of 11.4%. Given the strength in its fundamentals, there seems to be additional room for growth of this stock.

Factors That Make Iron Mountain a Solid Pick

Business Model: This company has stable and resilient core storage and records management businesses. It derives the majority of its revenues from fixed periodic (usually earned on a monthly basis) storage rental fees charged to customers based on the volume of their records stored. This assures a steady stream of recurring revenues for the company.

In the third quarter of 2024, Iron Mountain’s organic storage rental revenues increased 9.3% from the prior-year quarter. The two-third of the benefit was driven by revenue management trends in its global RIM business and one-third from its data center business.

Expansion Efforts: This REIT has been expanding its fast-growing businesses, especially the data center segment, to supplement its storage segment performance. Given the strong demand for connectivity, interconnection and colocation space, demand for data centers is likely to rise in the coming years, poising this segment well for growth.

It leased 106 megawatts of data center capacity since the beginning of 2024 through Nov. 6, 2024. Due to the company’s strong pipeline, management expects to lease 130 megawatts for the year.

FFO Growth: Over the past three to five years, IRM recorded FFO per share growth of 16.12% compared with the industry’s average of 4.18%. Moreover, the company has reaffirmed its AFFO per share guidance for 2024 and expects it to be toward the upper-end of $4.39-$4.51.

Analysts also seem bullish regarding IRM’s FFO per share growth prospects. The Zacks Consensus Estimate for the company's 2024 FFO per share has been revised marginally upward over the past week to $4.49, suggesting 9% growth year over year.

Balance Sheet Strength & Cash Flow: Iron Mountain maintains a healthy balance sheet position with ample financial flexibility to meet its near-term debt obligations and other capital commitments while pursuing growth opportunities. As of Sept. 30, 2024, it had $2 billion of total liquidity. The company ended the quarter with a net lease adjusted leverage of 5.0 times, which is the lowest level it has achieved since the company's REIT conversion in 2014. Such a strong financial footing is likely to support its growth endeavors in the future.

Additionally, IRM’s current cash flow growth is projected at 4.46% against the 4.03% decline estimated for the industry.

Other Stocks to Consider

Some other top-ranked stocks from the broader REIT sector are Crown Castle CCI and Welltower WELL, 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 2024 FFO per share is pegged at $6.99, indicating a decrease of 7.4% from the year-ago reported figure.

The Zacks Consensus Estimate for Welltower’s 2024 FFO per share is pinned at $4.26, suggesting year-over-year growth of 17%.

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

Shares of SL Green Realty SLG have risen 23.6% in the past three months compared with the industry's upside of 0.8%.

Last month, this New York-based office real estate investment trust (REIT) reported a third-quarter 2024 FFO per share of $1.13, which missed the Zacks Consensus Estimate of $1.21. Results reflected decent leasing activity in its Manhattan portfolio and higher rental revenues.

Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its fourth-quarter 2024 FFO per share revised 3.9% upward over the past month to $1.33.

Factors Behind SLG's Stock Price Surge

SL Green has a mono-market strategy focus with an enviable footprint in the large and high-barrier to entry New York real estate market. The company is well-positioned to benefit from its well-located properties and the ability to offer top-notch amenities at recently developed office buildings.

SL Green is witnessing healthy leasing demand for its properties as tenants’ demand for premium office spaces continues to grow. In the third quarter of 2024, SL Green signed 42 office leases for its Manhattan office portfolio, encompassing 763,755 square feet. With an encouraging office leasing pipeline, the company remains well-positioned to navigate any challenging environment.

SL Green maintains a diversified tenant base to hedge the risk associated with dependency on single-industry tenants. Its largest tenants include renowned firms from different industries. As of Sept. 30, 2024, except for Paramount Global, which accounted for 5.5% of the company’s share of annualized cash rent, no other tenant in SLG’s portfolio accounted for more than 5% of its share of annualized cash rent, including its share of joint venture annualized cash rent. Moreover, with long-term leases to tenants with a strong credit profile, it is well-poised to generate stable rental revenues over the long term.

SL Green has been following an opportunistic investment policy to enhance its overall portfolio quality. This includes divesting its mature and non-core assets, including residential properties, in a tax-efficient manner and using the proceeds to fund development projects and share buybacks.

In July 2024, SL Green closed the sale of the Palisades Premier Conference Center for $26.3 million plus certain fees. The transaction generated net proceeds of $19.8 million for the company. Such match-funding initiatives indicate the company’s prudent capital-management practices and will relieve pressure from its balance sheet.

Key Risks for SLG

The elevated supply of office properties in some of SLG’s markets remain concern. Competition from developers, owners and operators of office properties and other commercial real estate are likely to weigh on its pricing power. Geographic concentration of assets adds to the company’s woes.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Iron Mountain IRM and Welltower WELL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Iron Mountain’s 2024 FFO per share stands at $4.49, indicating an increase of 9% from the year-ago reported figure.

The Zacks Consensus Estimate for Welltower’s 2024 FFO per share is pinned at $4.26, suggesting year-over-year growth of 17%.

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

Shares of Cousins Properties CUZ have rallied 30.5% over the past six months, outperforming the industry's growth of 15.2%.

Early November, Cousins Properties announced its agreement to acquire Vantage South End, a 639,000-square-foot lifestyle office property in Charlotte’s South End submarket, for $328.5 million. This strategic acquisition aligns with Cousins’ Sun Belt-focused strategy and enhances its presence in one of Charlotte's most dynamic submarkets.

Last month, this office real estate investment trust (REIT) reported third-quarter 2024 funds from operations (FFO) per share of 67 cents, which met the Zacks Consensus Estimate. Results reflected strong leasing activity and higher rent realizations amid rising demand for office spaces. The company, currently carrying a Zacks Rank #3 (Hold), raised its guidance for 2024 FFO per share.

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

Cousins Properties’ trophy portfolio of Class A office assets in the high-growth Sun Belt markets is poised to benefit as the region is experiencing a population influx. Amid favorable migration trends and a pro-business environment, corporate relocations and expansions in the Sun Belt markets have gained pace, and this is driving the demand for office space.

As a result, CUZ is witnessing a recovery in demand for its strategically located office properties, as reflected by the rebound in new leasing volume. For the nine months ended Sept. 30, 2024, the company executed 114 leases for a total of 1,557,135 square feet of office space with a weighted average lease term of 7.8 years.

Cousins Properties enjoys a well-diversified, high-end tenant roster with less dependence on a single industry. This enables it to enjoy steady revenues over different economic cycles. The company is also seeing many tenants returning to offices or announcing plans to report to workplaces. This is likely to support office market fundamentals in its markets.

CUZ makes concerted efforts to upgrade portfolio quality with trophy assets’ acquisitions and opportunistic developments in high-growth Sun Belt submarkets. From 2019 through Oct. 24, 2024, apart from the TIER REIT transaction, the company acquired 3.6 million square feet of operating properties, completed 2.2 million square feet of development and sold 5.5 million square feet of operating properties. Its notable development pipeline is likely to deliver meaningful additional annualized net operating income (NOI) in the upcoming years.

Cousins Properties maintained a healthy balance sheet position and exited the third quarter of 2024 with cash and cash equivalents of $76.1 million, with no amount drawn under its $1 billion credit facility. As of Sept. 30, 2024, CUZ had a net debt-to-annualized EBITDAre ratio of 5.10. With considerable liquidity and access to capital markets, the company seems well-placed to bank on long-term growth opportunities.

Key Risks for CUZ

Competition from peers is expected to affect Cousins Properties’ pricing power. Moreover, CUZ has a significant concentration risk in its portfolio, and any economic or political downturn in its markets is likely to affect its performance.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Iron Mountain IRM and Welltower WELL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Iron Mountain’s 2024 FFO per share is pegged at $4.49, up 8.98% year over year.

The Zacks Consensus Estimate for Welltower’s 2024 FFO per share is pegged at $4.26, up 17.03% year over year.

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