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UHAL: First quarter revenue 0.08% higher than our estimate. Excess repair costs are still a significant drag on earnings but improvement is in sight. Stock price at bottom end of our target range.

By Ian Gilson, PhD, CFA



AMERCO (NASDAQ:UHAL) reported its 2019 first quarter financial results for the 2019 fiscal year after the market closed on August 08, 2018, followed by a conference call the following day. Our estimate of Moving & Storage revenue was (slightly) below the reported numbers. For the first time in many years fleet utilization showed a significant gain (this is very significant but it will take time to see if this occurs in future quarters).

Excluding operating expenses most of the numbers were in line with our estimates. Profit from the sale of trucks, included in depreciation expense, was above our estimate. Repair and maintenance expenses, the most significant part of operating expenses, continue to be impacted by $28 million of above average repairs needed to bring vehicles into the condition required by current buyers. All in all there was another $13 million of many small added costs as compared to the same quarter a year ago.

The profit from the sale of trucks increased from $5 million a year ago to $16 million in 1Q19. This really should be applied to the $28 million in added expenses but the company has traditionally included the profit in the depreciation account.

Given the increase in profit margins on truck sales, an easier selling market for used trucks in a weakening new car market and the improved quality of U-Haul's vehicles we believe that the excess cost move lower through 2019 and may not be a factor by the second half of fiscal 2020.

Looking at the interest, leasing, profit from sales and depreciation expense lines suggest to us that the total fleet size has increased a little less than 5% year over year and transaction increased by over 2%. These are "soft" numbers since there are many changes in the accounts that are not related to fleet size.

U-Box is growing at a high rate but profits are still hard to achieve in the long distance box moving sector (there are three types of business in container storage market).

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