Americold Earnings: Robust NOI Growth Driven by Rate Escalations and Higher Occupancy

No-moat-rated Americold Realty’s COLD strong first-quarter results were driven by pricing initiatives, rate escalations, higher economic occupancy, and incremental revenue from recently completed expansion and development projects. The firm reported adjusted funds from operations of $0.29 per share, 11.5% higher than the $0.26 in adjusted funds from operations during the first quarter of 2022. Core EBITDA, which is less prone to quarterly fluctuations, was reported at $133 million in the first quarter, up approximately 20% compared with the $111 million in core EBITDA during the first quarter of the previous year. Management has slightly increased its 2023 adjusted funds from operations guidance to $1.16-$1.26 per share on account of higher warehouse same-store net operating income growth, which was partially offset by lower transportation and managed NOI, higher SG&A expenses, and higher interest costs. We do not plan to change our $33 fair value estimate as we incorporate the first-quarter results.

The all-round strong performance in its warehouse segment was the quarter’s main highlight. The economic occupancy rate in the company’s same-store portfolio was recorded at 85.0%, up 750 basis points in the current quarter compared with the previous year as food manufacturers continued to ramp up production and labor-related issues eased in recent months. Increasing demand for cold storage facilities and the rent escalations by the company led to a 10.3% growth in same-store rent per economically occupied pallet in the first quarter on a constant currency basis. The hearty growth in occupancy and rent per pallet led to around 20% growth in same-store rent and storage revenue on a constant currency basis. Same-store expenses increased by about 11.5%, resulting in a same-store rent and storage contribution NOI growth of 24.8% on a year-over-year basis. It was able to improve its same-store rent and storage margin to 65.2% compared with 62.6% in the first quarter of 2022.