UHAL: AMERCO reports another strong year driven by healthy demand and strong pricing. Management continues to pursue initiatives to increase capacity in the self-moving rental equipment, self-storage and U-Box businesses.

By Steven Ralston, CFA

NASDAQ:UHAL

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Demand continues to be strong for the company’s self-moving rental equipment, self-storage products and U-Box business. As a result, total revenues for fiscal 2022 increased 26.4% to $5.74 billion. Furthermore, increased demand was coupled with strong pricing driving the expansion of the operating margin by 750 bps to 28.7%. Consequently, AMERCO (NASDAQ:UHAL) realized net income of $1.123 billion (or $57.29 per diluted share).

Under the company’s long-term growth strategy, management had optimally positioned the Moving and Storage operating segment to benefit from the surge in demand over the last two fiscal years. Consistent investments in capacity expansion increased the number of retail locations, box trucks and trailers in the rental fleet. However, delays at truck manufacturers (GM and Ford) related to supply chain issues continue to disrupt management’s plan to return to a normalized rotation program.

Management continues to focus on operational metrics, particularly increasing transaction volume and managing pricing consistent with demand and inflationary pressures, along with maximizing utilization of the self-moving equipment fleet. In fiscal 2023, management plans to invest $1.8 billion (capital expenditures) into the truck rental fleet, which will be dependent upon manufacturer availability.

Management continues to invest steadily in the self-storage area. The company’s property acquisition pipeline continues to be robust. New locations continue to be opened, along with expanding capacity of existing locations. Management is actively seeking to acquire new locations.

U-Haul maintains and continually enlarges a fleet of rental equipment, including trucks, trailers and towing devices. Historically, revenue growth has been achieved by

• Growing the distribution network

◦ The number of company’s retail locations has grown at a 5-year CAGR of 3.71%

• Increasing the size of the fleet

◦ The truck fleet has grown at a 5-year CAGR of 4.40%

◦ The trailer fleet has grown at a 5-year CAGR of 2.71%

• Expanding the self-storage footprint

◦ The number of self-storage locations has grown at a 5-year CAGR of 5.07%

◦ The number of rentable units has grown at a 5-year CAGR of 8.56%

◦ The rentable square footage has grown at a 5-year CAGR of 7.88%

As a result, AMERCO’s revenues have increased at a 5-year CAGR of 10.90%.

Also, management continues to invest capital in the U-Box program.

Management admits that inflationary pressures may challenge the company’s ability to expand or even maintain the operating margin attained in fiscal 2022.

The recent pressure on AMERCO’s stock appears to be correlated to the multiple contraction being experienced by both the market in general and the self-storage space in particular.

Fiscal 2022 Financial Results

On May 25, 2022 after the market close, AMERCO reported financial results for the fiscal year ending March 31, 2022. Total revenues increased 26.4% to approximately $5.74 billion, driven by a 28.4% increase (or an increase of $875 million) in self-moving equipment rentals, a 29.3% increase (or $139.9 million) in self-storage and 48.0% (or $139.8 million) in the other revenue, which is primarily driven by the U-Box business. The surge in revenues (driven by demand and pricing, along with management’s initiatives into self-storage and U-Box) increased the 5-year CAGR of revenues from 6.76% in fiscal 2021 to 10.90% in fiscal 2022.

In the self-moving equipment rental business, revenues increased across most metrics: volume of transactions and average revenue per transaction for both in-town and one-way rentals of trucks and trailers.

In the self-storage area, revenues increased 29.3% (or $139.9 million) as the average monthly number of occupied units increased by 25% during fiscal 2022, driven by occupancy gains at existing locations a 10% increase in new capacity (4.6 million net rentable square feet) over the last 12 months and an increase in monthly revenue per occupied foot.

Other revenue increased 48.0% (or $139.8 million), primarily driven by increased sales in the U-Box program.

In self-moving/self-storage products & services, revenue increased only 1.9% (or $6.5 million) as increased sales of moving supplies and propane were offset by decreases in hitch sales.

For the fiscal year, total costs and expenses increased 14.4%, well below the 26.4% increase in total revenues. The operating leverage was a significant driver of earnings growth in fiscal 2022 as the operating margin expanded by 750 bps to 28.7%. Operating expenses increased 22.3% (or $488.8 million) from personnel costs, fleet repair expenses, fleet maintenance, property taxes, payment processing fees and increased freight costs associated with the U-Box program. Cost of sales and commission expenses increased 30.3% and 21.3%, respectively. Depreciation expense decreased $127 million (or 20.9%), primarily due to a slowdown in the expansion of the rental fleet as supply chain issues have delayed new truck production.

Earnings from operations increased 71.1% (or by $683.8 million) to $1.645 billion compared to $961.1 million in fiscal 2021 year. An income tax expense of $352.2 million was recorded.

For the 2022 fiscal year, AMERCO reported a net income of $1.123 billion (or $57.29 per diluted share) compared to $610.9 million (or $31.15 per diluted share) for the fiscal 2021 year. Shares outstanding have remained stable at 19,607,788 shares for over a decade.

As of March 31, 2022, AMERCO has a strong liquidity position in the Moving and Storage operating segment of approximately $2.723 billion (cash plus availability from existing loan facilities) over double the $1.115 billion as of the end of the prior fiscal year. Working capital increased 23.3% to approximately $6.996 billion.

Special Dividends

AMERCO’s most recent special dividend was declared on October 6, 2021. The special cash dividend of $0.50 was paid on October 29, 2021 to holders of record on October 18, 2021.

Updated Tables Reflecting over a Decade’s Worth of Operating Metrics

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