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.

 

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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.