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UHAL: Reported first quarter financials spot on our projections.

By Ian Gilson, PhD, CFA


First quarter 2018 results were reported on Aug. 09, 2017. They were in line with our projections, as shown in our recent report.
Most of the line items were in line with our projections. Operating expenses were slightly above our estimates which dropped operating income to less than we had forecast. Other income and other expenses were better than expected which raised pretax income.
The proposed sale of the U-Haul facility at 23rd St. and 11 Ave. in Chelsea, Lower Manhattan, (not far from the Empire State Building) should occur in the second half of the current fiscal year. We have NOT included this in our estimates and will treat it as an extraordinary item when it is reported.
During the conference call management reiterated that the poor market for used trucks had impacted the financials more than expected. U-Haul (NASDAQ:UHAL) uses auction sales to partially balance the geographical dispersion of trucks (when one way rentals leave trucks in locations with low new transactions) and to remove older trucks from the fleet. Approximately 2% of the fleet ends up in locations with low demand and U-Haul does not back haul them.
The decision the buy and incur depreciation rather than lease is based on a cash flow calculation and not on earnings. At the moment interest rates favour purchase. About 70% of the capital expenditure on new fleet is bought using short term borrowings.
The new endeavor, Truck Share 24/7, is generating significant interest from the independent dealers. This has not been advertized as a feature but will be emphasized in promotions this quarter. It will add to dealer revenue without adding expenses (including company owned locations) so it is an attractive feature in web based bookings.
U-Box is still growing! The purchase of rented boxes in April is working out. U-Box has been profitable for the past four quarters.
Self storage rates continue to improve as recent start-ups increase occupancy. For over a year AMERCO's management has voiced its view that self storage facilities are attracting inexperienced buyers that are paying too much for them. On the other hand local regulations have increased the time lag between land purchase and the start of rentals.
We have tweaked our numbers for the next 7 quarters but there are no significant changes to EBITDA and EBITDAL that change our target price range. 


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