UBS Downgrades Sun Communities (SUI) to Neutral

UBS analyst Michael Goldsmith downgraded Sun Communities (NYSE: SUI) from Buy to Neutral with a price target of $134.00 (from $155.00).

The analyst comments: "We downgrade SUI from Buy to Neutral as execution challenges weigh on its earnings algorithm and will require time to correct. We believe SUI has a quality portfolio and its core segments generate stable, growing cash flows. However, we now believe it will take time for it reap the value of its portfolio, execute its restructuring plan, and re-gain the market's support. This should limit share upside in the intermediate term. Notably, demand and expenses remained pressured in 3Q'24 as SUI lowered its North America SSNOI 2024 guide at the midpoint by -220 bps to 3.0% driven by moving pieces in both revenues (midpoint guide lowered by -60 bps to 4.4%) and expenses (midpoint guide increased by +260 bps to 7.1%). Its restructuring plan anticipates run-rate expense savings of $15-$20 mm. While this is a starting point, it screens minimal & prior execution challenges cast doubt (if all savings are G&A it amounts to only a decrease of -7%). SUI's G&A load would still remain elevated at ~19% (ELS 6%). We now model Core FFO/sh in 2024 of $6.76 (prior $7.12) & 2025 of $7.10 (prior $7.59). SUI will have opportunities to demonstrate the success of the turnaround by reducing its G&A load, generating consistent results, and meeting/beating guidance. Still, we think it requires a multi-quarter effort to regain market confidence."

For an analyst ratings summary and ratings history on Sun Communities click here. For more ratings news on Sun Communities click here.

Shares of Sun Communities closed at $125.89 yesterday.

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