Sun Communities Earnings: Strong NOI Growth Across Portfolio Except for Transient RV Segment

No-moat Sun Communities' first-quarter results were slightly better than we anticipated, and we are reaffirming our $172 fair value estimate. Same-store occupancy for the manufactured home segment fell 60 basis points sequentially but rose 70 basis points year over year to 96.7%. Rental rates increased 6.0%, leading to same-store revenue growth of 6.8%, beating our 4.9% estimate. Operating expenses were up only 3.4%, so same-store net operating income grew 8.0% for the segment. Recreational vehicle revenue growth continued to show significant divergence, with the annual business up 13.4% and the transient business down 13.1%. However, operating expenses for the segment were down 1.7%, so same-store NOI growth came in at 8.1%. Combined with marina same-store NOI that was up 7.5%, total company same-store NOI grew 7.9%, better than our 7.0% estimate. As a result, Sun reported core funds from operations of $1.19 per share, $0.04 better than our $1.15 estimate.