High-Risk OIl and Natural Gas Transportation Should Focus Investor Spotlight on Iron Mountain
The transportation of our essential oil and natural gas supplies has always been a risky business; with that risk underscored whenever there's a major accident -- like the massive gas pipeline explosion last week in western Missouri.
But it's events like the Missouri accident that should focus industry and investor attention on Iron Mountain (NYSE: IRM).
Operating in the business software and services sector, along with other firms like Microsoft (NASDAQ: MSFT), CA Inc (NASDAQ: CA) and Citrix Systems (NASDAQ: CTXS), Iron Mountain is the premier company in pipeline record management. Iron Mountain plays a critical role in preventing pipeline disasters, maintaining the infrastructure and in overall risk control. The position that Iron Mountain has in the energy network will increase in scale and importance as the use of natural gas increases.
Due to advances in fracking technology, natural gas has become much cheaper.
As a result, it is becoming more widely used: no surprise there, with basic economics at work for when any commodity falls in price. But natural gas requires a network of three pipelines to take the fuel from the ground to the business or the home. It is not like coal, which can be scraped up by a shovel and carried to its end use in a sack.
Pipelines for transporting natural gas and oil are very sophisticated, high-technology operations. The networks are thoroughly regulated at every level of government. The private sector also enforces the harsh regime of rules and regulation, with no mercy in the form of lawsuits.
To protect valuable pipeline operations, therefore, requires professional records management.
Due to the nature of the oil and natural gas industry, that is generally the farthest thing from the mind of the operators -- who prefer to emphasize exploration and production.
As detailed in a recent Benzinga article, recent reports by the United States Energy Information Agency and the International Energy Agency both projected a huge increase in the global demand for oil and natural gas. Much of that will be transported by pipeline networks across the United States and Canada, as North America is now the world's largest producer of fossil fuels.
The demand for Iron Mountain's management services should increase greatly around the planet, and especially in North America. Should the Keystone Pipeline finally be created, there will be a huge need in just Canada alone for what Iron Mountain has to offer. The Keystone Pipeline will run from the oil-rich province of Alberta to the Gulf of Mexico; and the best in pipeline management will be needed for every inch of the projected 2151 miles at every phase of its operations, from construction to carrying the fuel.
Wall Street certainly expects big things for Iron Mountain -- with analysts predicting its earnings per share will increase by 13.50 percent annually over the next five years. That is almost twice the projections for Microsoft. It is also higher than what is expected from the performance of Citrix Systems.
Iron Mountain stock has been strong recently, up more than six percent for the last month of trading.
Companies that want protection for all the entities impacted by pipeline operations, from the local communities to shareholders, should increase the demand for the products and services of Iron Mountain. While waiting, there is a very generous dividend of 3.83 percent. Now trading around $28 a share, the mean analyst target price for Iron Mountain over the next year of market action is $33.58.
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