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UHAL Fourth quarter revenue close to our estimates, but operating expenses were much higher than expected.

By Ian Gilson, PhD, CFA


We have reduced our target price to $400. A $1 a share was paid in March, 2017
On May 24 2017 AMERCO (NASDAQ:UHAL) filed its 10K for fiscal 2017 and followed this with a conference call on May 25.
Revenue was slightly below our estimates but were within our range of projections. Most of the expenses were close to our estimates except for operating expenses. These were far higher than expected and this was a major part of the discussion on the conference call.
There were two major factors, all of which we expect to carry through fiscal 2018 and have a negative impact of operating income before growth in revenue overcomes the added expenses.
The two largest factors were increased headcount and higher medical costs ($14 million; AMERCO is self insured on medical premiums and the medical cost increase was about $5 million). Higher maintenance and repair costs were $14 million, mainly due to the increased fleet size although this is higher than we would have expected based on fleet numbers. Increased local taxes and expenses ($7 million) and accounting changes ($6.3 million) added up to close to $41 million of added expense. If we delete this from the reported number the ration of operating expenses to Rental revenue was in line with our projections.
Net new dealer additions were 500, bringing the total of independent dealers to 20,000 and company owned facilities are now over 1,750
As of March 31, 2017 the rental fleet was approximately 150,000 trucks; 112,000 trailers and 40,000 towing devices. The truck count in March 2016 was 139,000 and the truck increase was higher than the truck rental change. As the additional trucks generate more revenue the operating expense should move closer to historical values. We estimate that average revenue per truck declined about 4% for the full fiscal year.
Fleet additions of the largest truck will be complete over the next six months and we expect the increase in depreciation to be less than that over the last year.
U-Haul has added a new feature to its rental system U-Haul Truck Share 24/7. This allows a prospective renter to find and book a rental truck any time, any day. Many dealers keep normal shop hours but the company now has 3,457 locations that provide 24 hour service, Ultimately the service can be extended so that a renter can find a truck, its key and paperwork, and drive off without needing any personnel intervention.
We have made certain assumptions as to how the transaction growth and truck utilization will absorb the added expenses. This has reduced our earnings estimates by a significant amount. Given the increased uncertainty of revenue growth
A $1 a share dividend was paid in March 2017.


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