Equity Lifestyle Earnings: Seasonal Revenue Down but Operating Expenses Also Lower Than Anticipated

Second-quarter results for no-moat Equity Lifestyle were relatively in line with our expectations, leading us to reaffirm our $77 fair value estimate. Occupancy for the same-store manufactured homes portfolio held steady at 94.9% for the fourth straight quarter. Monthly rent per site increased 6.0% year over year, leading to 6.2% same-store revenue growth from the manufacture housing segment, in line with our estimate of 6.5% growth. Annual membership revenue from recreational vehicles and marinas was up 6.7% in the second quarter, better than our 5.8% estimate. However, seasonal revenue fell 17.2% while transient revenue fell 5.6%, leading to total same-store revenue of just 2.0% for the RV and marina segment. Same-store operating expenses were only up 3.4% in the second quarter, below our estimate of 5.4% growth, so the company reported same-store net operating income growth of 5.5% that was only slightly below our estimate of 6.2% growth for the quarter. Normalized funds from operation came in at $0.66 per share for Equity Lifestyle in the second quarter, which was two cents below our estimate of $0.68 but two cents above management’s prior guidance range for the quarter.