Americold Realty Trust (COLD, $29.14): “Hot Drop, Cooler Future”
By: Elisabeth Desmarais, AIM Student at
Marquette University
Disclosure: The AIM Equity Fund currently
holds this position. This article was written by myself, and it expresses my
own opinions. I am not receiving compensation for it and I have no business
relationship with any company whose stock is mentioned in this article.
Summary
- Americold Realty Trust (NYSE: COLD) Is a real estate investment trust that acquires, manages, and develops warehouses providing cold chain storage solutions. The company owns a total of 246 warehouses and covers over 1.4 billion cubic feet of storage. COLD generates its revenues from warehouse income (77% of FY20 revenue), third-party managed (15%) and transportation (7%). The Atlanta-based company operates in the US, Australia, New Zealand, Argentina, Canada, and Brazil.
- The company’s stock price has dropped approximately 40% from same time last year when the company hit its 52-week high which can be explained by labor shortages in the food industry. Thus, impacting occupancy levels in the warehouses due to lower amount of product available to be distributed.
- Since being added to the portfolio in October 2020, at $37.52 with a price target of $43.66, COLD’s performance has been volatile. It has produced a total return of nearly 1.1% for the portfolio and consists of approximately 10% of the domestic real estate sector. Instead of attempting to survive during the COVID-19 pandemic, like some companies, Americold has instead seen its revenues and growth increase. COLD has been growing and has experienced great performance it the past few years with 3-year revenue of 8.8% and 1-year growth of 11.1%. During the peak of the pandemic back in 2020, the demand for cold storage increased dramatically as well as the demand for fresh products to be delivered at customer’s doorsteps. These factors allowed the company to continue expanding its operations and increase their warehouse ownership. In 2019, Warehouse Income, Third-Party Managed and Transportation segments, individually made up 77%, 15% and 7% of total revenue. Accordingly, the company has been stable and has seen these segment percentage remain almost the exact the same FY20.
- Due to labor shortages, the company is expecting its full year 2021 Adjusted Funds from Operations (AFFO) to range from $1.15 to $1.20, which is lower compared to previous range of $1.34 to $1.40. FirstService had an excellent 2nd quarter FY20, where the Global Warehouse revenue and NOI increase by 35% and 20% individually. Additionally, the company increased its revenues, company posting revenue, EBITDA, and EPS growth of 15%, 25%, and 55% respectively versus 2019’s 4th quarter. When comparing FY2019 and FY2020 results we can see that the company was able to perform despite the COVID-19 pandemic. Accordingly, Americold was able to grow (Yoy) its revenue, EBITDA and FFO by 11.1%, 6.8% and 12.2% respectively.
- The company has announced it third quarter dividend which will remain at $0.22, same as the second quarter announcement.
- The company’s same store occupancy was down by 530 bps when compared to its previous year, which was caused by food producers’ shortage who were not able to provide enough products. However, management expect these levels to be back to normal by mid-2022, and bring the company back where it left off.
Key points:
The
company invested significantly during 2020 despite economic complications and the
challenging back drop of the COVID-19 pandemic. COLD completed $2.6 billion of
acquisitions and started to develop numerous projects totaling $465 million.
This resulted in a record year for the company in term of investments and
external growth and led revenues to increase by 35%. COLD was also able to keep
a low leveraged balance sheet and delivered AFFO per share growth of 10.3%. In
May, Americold made two acquisition, one in New Jersey for KMT Brrr! and one in
England for Bowman Stores for over $150 million. Furthermore, COLD also
acquired 3 new projects in New York, Atlanta, Dublin, Ireland, which are
expected to be completed between 2022 and 2023. The company wants to continue
expanding and said to be continuously looking for new opportunities and potentially
exploring the direct-to-customer business. One example is the closed
acquisition of ColdCo’s which includes unique brands that focus on the
direct-to-customer business.
What has the stock done lately?
Over
the past three months, COLD’s stock value has decreased from $38.22 to $29.19,
resulting in a drop of 31%. The stock’s value ranged from $28.15 to $39.30 over
the past three months and has a 52-week range of $28.82 to $40.85. The stock
recently hit a lower value this month which has not been that low since May
2020.
Past Year Performance:
FSV’s stock has decreased in price value compared to
last year, thus the stock was trading at $35.80 in October 2020 and currently
trades around $30. In the past year, the stock has performed well and remained
healthy when excluding its recent drop to labor shortage and decrease in food
production.
My Takeaway
Americold Realty Trust has been very strong over the
years and has grown tremendously sine its foundation 115 years ago. Due to
strong and experienced management, the company was able to expand across the
world and continue to do so throughout the peak of the pandemic and now. COLD kept
revenue growth consistent year after year despite harder economic and financial
circumstances. Americold had completed various acqusitions in the past year and
has invested significantly in new projects. Therefore, these investments are
expected to pay off in the next year as well as in future years when these
projects will be completed. The company need to continue its aggressive strategy
of expanding and targeting new segments such as direct-to-customer to diversify
its business model. Accordingly, I believe that COLD will continue having
growth in the foreseeable future and see its price go back up to standard
levels. It is recommended to keep Americold Realty Trust in the Small Cap AIM Portfolio.
