What happened
Shares of American Tower (AMT -0.70%) fell by 11.4% in February, according to data from S&P Global Market Intelligence.
As a result of this drop, the REIT, which owns almost 225,000 communication towers within its portfolio, saw its share price decline by 7.8% year to date.
Image source: Getty images.
So what
American Tower reported its 2022 earnings last month and saw 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 inched up 3.5% year over year to $9.76. CEO Tom Bartlett attributed the better performance to healthy leasing trends, contributions from newly constructed sites, and the clinching of a record level of new business for CoreSite, a data center owner that was acquired by American Tower in November 2021. He was also optimistic that the REIT can continue to grow as it serves as a key player within the 5G ecosystem.
Despite the good results, investors were probably spooked by American Tower's 2023 guidance. The communication tower owner forecast a 2.9% year-over-year increase in property revenue at the midpoint of its guidance, but also a slight 1.6% year-over-year dip in FFO per share. The main culprit was higher interest rates that will result in higher financing costs for the REIT.
Now what
A forecast, however, does not determine how American Tower's financial results will turn out. The REIT continues to look for ways to enhance value for shareholders and recently announced a partnership with semiconductor and software giant Qualcomm (QCOM 1.45%). The partnership will see system integrator Xingtera install a new type of server on an American Tower edge data center to increase connectivity and resilience for its customers. Edge computing involves the processing of data at the periphery of the network and as close to the originating source as possible. Last year, American Tower had already identified more than 1,000 sites that could support edge data center locations and is planning for a major edge rollout.
Investors looking for steady income can also rely on regular and increasing distributions from the REIT. Distributions used to rise at an average of 20% per year, but this increase has since come down to between 12% to 15% per year. Still, it's not a shabby growth rate for a reliable REIT that is at the forefront of network connectivity and which represents the future of 5G connectivity.
