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UHAL : Third quarter moving & storage revenue beats expectations as did operating income

02/08/2018
By Ian Gilson, PhD, CFA

NASDAQ:UHAL

On Feb. 7, 2018 AMERCO (NASDAQ:UHAL) reported its third quarter numbers followed by a conference the following morning. Moving and Storage revenue beat our forecast as did operating income. Adjusting for the sales of assets pretax income was slightly below our estimate.
 
The gain in moving revenue of 6.15% was almost entirely based on transaction growth fueled mainly by the increase in fleet size and occurred in both the one-way and point to point markets. All of the operating metrics improved with gains in fleet size (as well as trailers and hitches) , Company owned locations and dealer locations. Since Company owned storage locations are also truck leasing locations the acquisitions of existing buildings that are then converted to storage facilities benefits both parts of operations.
 
Maintenance and repair cost continue to hamper the growth in earnings. Over $32 million additional expenses, as compared to the prior year, in this area had a significant impact on operating margins based on moving and storage revenue. Much of this increase was due to retention of older trucks that would normally be sold. Truck sales in the third quarter were $389 million as compared to $403 million a year ago.
 
AMERCO reported the sale of the Chelsea NY property for $191 million (and purchased offsetting properties so deferring any federal tax on the sale) and other properties for $1.4 million. We have excluded this from our normalized earnings.
 
The impact of the Tax Reform Act was a non-cash profit of $339 million. The cash on the balance sheet now exceeds $1022 million.
 
The estimated reported tax rate for future years is 24.3%.

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