Sun Communities Bears The Brunt Of Lower Home Sales In UK Amid Macro Woes: Analyst

JMP Securities analyst Aaron Hecht reiterated the Market Outperform rating on Sun Communities, Inc. SUI, lowering the price target from $160 to $150.

After the Q2 results, the analyst has been downbeat about the SUI's overall guidance decline this quarter, with the UK being the most significant contributor to the sluggishness. 

The primary driver was lower home sales as macroeconomic conditions have deteriorated in the country, the analyst flags.

The unforeseen Ukraine/Russia conflict combined with the UK no longer being in the EU is a double whammy for SUI. 

Hecht sees limited clarity concerning home sales volume in the future, considering interest rates and the economy, which represent a risk to future numbers. 

However, one positive in Q2 has been the results of the Marina segment, which has proven its resilience during a choppy economic environment. 

For Marina, the FY23 guidance was increased by 60bps at the midpoint, with same-store revenue increasing 9.2% Y/Y, while expenses rose 3.4%, resulting in a high 11.9% NOI growth, the analyst notes. 

This has been a stellar year for the segment, showing true resilience in a difficult economy, mentions the analyst. 

However, there is little doubt that SUI's strategy to focus on marinas with larger slips has been a benefit, as there are limited options for boat owners to relocate. 

Hecht believes this segment will be the company's focus from a capital deployment perspective, with the asset class gaining additional institutional interest over the coming years. 

For FY23, the analyst sees revenues of $3.201 billion, while for FY24, Hecht projects revenues of $3.489 billion.

Price Action: SUI shares are trading lower by 1.27% to $122.26 on the last check Tuesday.