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UHAL third quarter revenue growth was ahead of expectations but a large increase in depreciation hits earnings.


By Ian Gilson PhD,CFA


AMERCO (NASDAQ:UHAL) reported is financials for the 3Q17 on February 8, 2017, followed by a conference call the next day.

Revenue was slightly above our estimates in every category. All of the operating expenses except depreciation were close to our estimates. Transactions continue to increase on a year/year basis and dollar value per transaction was about the same as in 2Q17, which is the peak revenue quarter.

Expense ratios were in line with our estimates, as were the fixed  costs such as interest income except for depreciation. As we have mentioned in prior reports the company is in the process of replacing the biggest, and oldest, portion of its fleet acquired in 2008. The depreciation rate on these truck is 2% of the acquisition cost. The new trucks are depreciated at 16%. The list price of a new Ford F750 series truck starts at close to $60,000. Although the number of large trucks is small the total dollar amount is large. Buying these trucks should peak in 2018 and overall depreciation should then start to decline.

Resale prices for trucks sold continue to be below year ago levels and AMERCO has been selling less of them this year than they did a year ago. Profits from the sale of trucks is netted against depreciation so this has a negative impact on earnings.

Storage capacity continues to grow. Room count and square feet increased from 2Q17 levels. Occupancy declined due to seasonal factors. Dollars per sq. ft. increased slightly and dollars per room per quarter was flat as compared to year ago level.

Management was optimistic about 4Q17 results based on the trends from the 3Q17 into the new year. We have adjusted our forecasts to reflect our expectations for 2018 and 2019.

Based on positive trends in costs and operations management is optimistic about the fourth fiscal quarter of 2017.


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