Why the American Tower fell 11.4% in February

What happened

American Tower (AMT 2.52%) shares fell 11.4% in February, according to data from S&P Global Market Intelligence.

As a result of that decline, the REIT, which owns nearly 225,000 communications towers in its portfolio, saw its share price fall 7.8% year-to-date.

Image source: Getty Images.

so what

American Tower reported its earnings for 2022 last month, posting solid growth in both revenue and funds from operations (FFO). Total revenue rose 17.2% year over year to $10.7 billion, while FFO per share rose 3.5% year over year to $9.76. CEO Tom Bartlett attributed the better performance to healthy occupancy trends, contributions from newly constructed sites and the achievement of record levels of new business for CoreSite, a data center owner acquired by American Tower in November 2021. He was also optimistic the REIT can continue to grow as it plays a key role in the 5G ecosystem.

Despite the strong results, investors were likely spooked by American Tower’s 2023 guidance. The communications tower owner, halfway through its guidance, called for a 2.9% year-over-year increase in real estate earnings but also a slight 1.6% year-over-year decline in FFO per share. The main reason was higher interest rates, which will lead to higher financing costs for the REIT.

What now

However, no forecast determines what American Tower’s financial results will be. The REIT continues to look for ways to add value to shareholders and recently announced a partnership with semiconductor and software giant Qualcomm (QCOM -0.14%). As part of the partnership, system integrator Xingtera will install a new type of server in an American Tower Edge data center to increase connectivity and reliability for its customers. Edge computing involves processing data at the edge of the network and as close to the source of origin as possible. Over the past year, American Tower has identified more than 1,000 sites that could support edge data center locations and is planning a full edge rollout.

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Investors looking for steady income can also rely on the REIT’s regular and increasing payouts. Payouts used to grow at an average of 20% per year, but that increase is now between 12% and 15% per year. Still, it’s not a bad growth rate for a dependable REIT that’s at the forefront of network connectivity and the future of 5G connectivity.

Royston Yang holds positions at American Tower. The Motley Fool has positions in and recommends American Tower and Qualcomm. The Motley Fool has a disclosure policy.