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UHAL: AMERCO 3Q19 revenue were well above our estimates and this pushed earnings higher than expected

By Ian Gilson, PhD, CFA



AMERCO's (NASDAQ:UHAL) third quarter revenue was much better than expected. This was mainly due to the corporate accounts revenue adding three percentage points to the growth year over year.

The corporate account is the revenue from parcel delivery over Christmas. FedEx, UPS, USPS and others use U-Haul for peak shaving home delivery for internet and other sales. This revenue occurs only in the third fiscal quarter.

Without this gain truck rental revenue would have been $609 million, very close to our estimate.

During the 3Q19 transactions and revenue per transaction increased. These changes were due to increased truck count and revenue per mile improvement, partially due to the increase in the proportion of larger trucks entering the fleet during 2018 CY. In 2019 the new trucks will move to a new cycle of replacement with an increase in the proportion of smaller trucks. Miles driven were in line with prior years.
The number of trucks sold in 3Q19 was lower than a year ago and realization per truck higher. This reduced the cost of maintenance and repair but management is still working on reducing the cost of preparing trucks for resale. In general expenses as a proportion of truck revenue were in line with prior periods.

Seasonal fluctuations in revenue are mainly due to the weather. In the late fall, winter and early spring revenue in the NE and Central United States drops to a low level, in some areas there is very little truck rental revenue. AMERCO uses a significant number of temporary employees during the peak seasons only. As a result the recent extreme cold should not have a material impact in 4Q19 results.
In February U-Haul reintroduced its reusable one-pound propane gas cylinder (U-Haul is probably the largest retail propane seller in the country). They will be available in 135 stores in California at a price below that of the competition, with a refill costing only $1.95, and are very popular for use in a myriad of small devices.

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