Barclays raises Sun Communities stock rating to Overweight

Published 29/05/2025, 07:48
Barclays raises Sun Communities stock rating to Overweight

On Thursday, Barclays (LON:BARC) initiated coverage on Sun Communities (NYSE: NYSE:SUI), a real estate investment trust specializing in manufactured housing and recreational vehicle resorts, with an Overweight rating and a price target of $141. The new rating reflects a positive outlook on the company’s recent operational changes and its potential for future earnings growth. With a current market capitalization of $15.8 billion and a beta of 0.88, Sun Communities has demonstrated stability in volatile markets. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value calculations, with analysts setting targets ranging from $126 to $160.

Barclays highlighted Sun Communities’ efforts to streamline its operations by selling its marina segment, which was finalized on April 30 with the initial sale netting $5.25 billion. The sale did not include $250 million worth of Safe Harbor subsidiaries, which are expected to close in the second quarter of 2025. The transaction was praised for its swift return on investment, yielding approximately a $1.4 billion gain over four years. InvestingPro data shows the company maintains a solid financial foundation with an EBITDA of $1.23 billion in the last twelve months, supporting its strategic initiatives. InvestingPro subscribers can access 8 additional key insights about Sun Communities’ financial health and growth prospects.

The sale has allowed Sun Communities to refocus its business on manufactured housing (MH) and recreational vehicle (RV) operations. Prior to the sale, the marina segment accounted for 22% of the company’s revenue for the fiscal year 2024. With the shift, MH/RV rental income is now projected to constitute 90% of the company’s annual net operating income (NOI), providing a new baseline for earnings growth. The company has maintained dividend payments for 33 consecutive years, currently offering a 3.1% yield, and has raised its dividend for 9 straight years, demonstrating strong commitment to shareholder returns.

Barclays also noted the potential for reinvestment of the proceeds from the marina sale as a source of future earnings upside. Additionally, the anticipated announcement of a new CEO by the end of the year is expected to further improve investor sentiment towards the company.

As Sun Communities continues to adapt its business model, the Overweight rating by Barclays underscores the firm’s confidence in the company’s strategic direction and its ability to generate increased value for shareholders.

In other recent news, Sun Communities reported its first-quarter 2025 earnings, revealing a mixed financial performance. The company posted a Core Funds From Operations (FFO) of $1.26 per share, exceeding the expectations of Citizens JMP analysts and the consensus estimate. However, the company reported a net loss with earnings per share of -$0.34, falling short of the projected $0.0491. Revenue also missed the mark, coming in at $470.2 million against a forecast of $559.26 million. Despite these setbacks, Sun Communities has raised its full-year Core FFO guidance, largely due to the capital benefits from the recent $5 billion sale of Safe Harbor Marinas.

The company’s strategic moves, including the sale of Safe Harbor Marinas, are expected to enhance its financial flexibility and support future investments. Citizens JMP has maintained its Market Outperform rating and a $140 price target for Sun Communities, highlighting the company’s strong balance sheet and core portfolio quality. Additionally, Sun Communities has adopted revised bylaws to modernize its corporate governance framework, aligning with common practices among publicly-traded Maryland corporations. Shareholders elected nine directors during the Annual Meeting and approved an extension of the company’s 2015 Equity Incentive Plan to 2035.

Sun Communities also announced a one-time cash distribution of $4 per share and an increase in its quarterly distribution by 10.6% to $1.04 per share. The company remains optimistic about its core operations, particularly in manufactured housing, despite challenges in the RV market. The company is focused on operational excellence and aims to drive consistent growth through disciplined execution and strategic capital allocation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.