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UHAL: Second quarter moving and storage revenue exceeded our estimate but cost increases were greater than expected. U-Box continues to grow. We are increasing our price target to $440.


By Ian Gilson, PhD, CFA



On Nov. 06, 2019 AMERCO (NASDAQ:UHAL) reported its second quarter results. Total moving and storage revenue exceeded our expectations (by 0.8%) but this was overshadowed by lower than expected growth in the traditional truck rental business, as shown below.

Sales benefitted from significant gains in other income, which includes U-Box which is growing at over 10% Y/Y.

Transactions did increase in the quarter but fleet additions grew faster and utilization dropped. Truck rental is a service industry where costs depend on expected demand. Consequently expenses were higher than we had forecast, especially depreciation, and operating income was below year ago levels.

We expect that the company will adjust is expense ratios to match a lower rate of growth over the next few quarters.

Other short term factors were lower equipment sales and an imbalance between certain markets, mainly California where there is a net migration out of state leaving the company with a shortage of trucks in certain areas. U-Haul does have a manufacturing plant near Los Angeles and can feed new trucks into the system. The smaller trucks have been in greater demand and we expect a shift from large chassis acquisitions to smaller ones.

Overall the stock market was disappointed with the results and the price declined by over $30 a share. However, the trading range has broken through the $400 limit of the past three years and valuations are still low compared to historical values.

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