Iron Mountain IRM is well-poised to gain from a recurring revenue business model and expansion efforts in the data center segment. A healthy balance sheet is likely to support the company’s growth endeavors over the long term. However, competition from industry peers and elevated interest expenses are its concerns.

What’s Aiding IRM?

Iron Mountain enjoys a steady stream of recurring revenues from its core storage and records management businesses. The company 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. Iron Mountain’s organic storage rental revenue increased 8.8% year over year in the fourth quarter of 2024. We estimate a year-over-year increase of 8.3% in storage rental revenues in 2025.

Iron Mountain is supplementing its storage segment’s performance with expansion in its faster-growing businesses, most notable being the data center segment. In February 2025, in a strategic partnership with Ooredoo Group, Iron Mountain has announced to take a minority equity stake in Ooredoo’s carrier-neutral data center company, MENA Digital Hub. This move,  along with the past, will enable the company to capitalize on strong demand for connectivity, interconnection and colocation space and drive leasing activity.

In 2024, the company attained data center revenue growth of 25.3%. It leased more than 100 MW of data center capacity for the third consecutive year in 2024. Due to the company’s strong pipeline, management expects to lease 125 MW for 2025.

Iron Mountain had a total liquidity of approximately $3.3 billion as of Dec. 31, 2024, and a weighted average maturity of 4.9 years. With this, it has ample financial flexibility to meet its near-term debt obligations and other capital commitments while pursuing growth opportunities. Iron Mountain ended the fourth quarter of 2024 with net lease-adjusted leverage of 5.0X, the lowest level since before the company’s REIT conversion in 2014. For 2025, the company expects to end the year at similar levels to year-end 2024.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Iron Mountain remains committed to that. In February 2025, concurrent with its fourth-quarter 2024 earnings release, it announced a 10.6% hike in its cash dividend to 78.5 cents per share from 71.5 cents paid out earlier. Given its healthy operating platform, our year-over-year adjusted funds from operations (FFO) growth projections of 8.1% for 2025 and solid financial position, the increased dividend is likely to be sustainable in the forthcoming period.

What’s Hurting IRM?

The records and information management services industry is highly fragmented with numerous competitors in North America and around the world. Although Iron Mountain offers compelling products and has a strong market position, the company faces significant competition. Going forward, this is likely to result in aggressive pricing and will keep margins under pressure.

Despite the Federal Reserve announcing rate cuts in the second half of 2024, the interest rate is still high and is a concern for Iron Mountain. As of Dec. 31, 2024, Iron Mountain’s net debt was approximately $13.68 billion. For 2025, our estimate indicates a year-over-year rise of 11.6% in the company’s net interest expenses.

Shares of this Zacks Rank #3 (Hold) company have decreased 15.4% over the past three months against the industry's 5% growth.

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Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Welltower WELL and SL Green Realty SLG, 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 Welltower’s 2025 FFO per share is pegged at $4.93, which indicates year-over-year growth of 14.1%.

The Zacks Consensus Estimate for SL Green’s full-year FFO per share is $5.50, which indicates an increase of 9.3% from the year-ago period.

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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This article originally published on Zacks Investment Research (zacks.com).

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