Iron Mountain Incorporated IRM is well-poised to benefit from its resilient business model and expansion into the data center business. Its solid balance sheet position also bodes well.

Last month, this Boston, MA-based real estate investment trust (REIT) reported fourth-quarter adjusted funds from operations (AFFO) per share of $1.11, surpassing the Zacks Consensus Estimate of $1.05. Moreover, the figure improved 8.8% on a year-over-year basis, attributable to solid performances in the storage and service segments and the data-center business.

Shares of this Zacks Rank #2 (Buy) company have rallied 24.4% over the past three months, outperforming its industry's growth of 4.8%. 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: IRM 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 fourth quarter of 2023, organic storage rental revenues grew 10% year over year, highlighting the continued pricing strength coupled with positive volume trends and data center growth.

Diverse Tenant & Revenue Base: Iron Mountain enjoys a diversified tenant and revenue base and serves more than 240,000 clients across different industries and locations. No single customer accounted for more than 1% of its revenues in 2023, reflecting a well-diversified revenue generation base.

Also, the company’s retention rate for its records management business was 92.9% in the fourth quarter of 2023. It is also seeing strong customer retention in the global data center business. These factors are likely to help the company generate stable cash flows over time.

Expansion Efforts: This REIT has been expanding its fast-growing businesses, especially the data center segment, to supplement its storage segment performance. Given the increasing 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.

In 2023, IRM leased 124 megawatts of data center capacity.

FFO Growth: Over the past three to five years, IRM recorded FFO per share growth of 16.33% compared with the industry’s average of 1.50%. Moreover, the company issued its guidance for 2024 and expects AFFO per share in the range of $4.39-$4.51.