UHAL: First quarter moving and storage revenue spot on our estimate but higher than expected expenses impacted earnings. Increasing dealer count should drive future revenue

By Ian Gilson, PhD, CFA



AMERCO (NASDAQ:UHAL) reported its first fiscal quarter results on Aug. 7 followed by a conference call the following morning.

Truck rental and Moving and Storage revenue were very close to our estimates, with a deviation of less than 0.5% between report truck rental revenue and our estimate.

Operating expenses were impacted by a significant increase in depreciation, driven in part by the increase in truck count. This increase in depreciation is expected to continue through 2020.

Transactions and revenue per transaction increased from prior year levels partly due to an increase in dealer count, both company owned (up by 80 to 2061) and independents. Moving revenue is driven by both truck count and total dealer count.

Company owned dealerships are usually storage facilities and the storage unit count grew from 428 in 4Q19 to 452 in 1Q20. Capital spending for storage will shift more to finishing existing units than acquiring new facilities.

Near term emphasis will be focused on better utilization of assets with an increase in fleet size. More trucks per dealer would improve operating margins.

The valuation is at the low end of the ratios of EBITDA and EBITDAL to stock price within a range of $350 to $425 and our target price of $400 per share remains unchanged.

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