U-Haul Parent Amerco's Profitability Improves in Its Third Quarter

U-Haul parent Amerco (UHAL 0.31%) reported its fiscal third-quarter 2019 results for the period ended Dec. 31 after the market close on Wednesday. 

Here's how the quarter worked out for the do-it-yourself (DIY) moving leader and growing self-storage player, which also has two insurance company subsidiaries. 

Image source: Getty Images.

 Amerco earnings: The raw numbers

Data source: Amerco. GAAP = generally accepted accounting principles. EPS = earnings per share.

Adjusted operating income for the year-ago period excludes the gain of $192.4 million from the sale of a portion of the company's Chelsea, NY, property. Adjusted EPS for the year-ago quarter excludes the $17.32 EPS benefit from U.S. tax reform and the $7.34 benefit from the Chelsea property sale. Excluding these items, EPS was $2.34. Moreover, the reported period's EPS got a boost from a lower tax rate relative to the year-ago period stemming from tax reform. Had this rate been in effect for the year-ago quarter, adjusted EPS for that period would have been $3.24.

There's only one Wall Street analyst who covers the company, so the "consensus" estimate has even less value than usual. That said, for some context, this analyst was looking for adjusted EPS of $3.74 on revenue of $900.7 million. So, Amerco beat on both the top and bottom lines. 

What happened with Amerco in the quarter?

• Revenue in the U-Haul segment, which accounted for more than 91% of the company's total revenue, increased 10% from the year-ago period to $838.9 million. Revenue from both one-way and in-town markets increased due to growth in the number of transactions and higher average revenue per transaction. 
• Revenue in the insurance segment (comprised of one property-casualty and one life insurance company) was approximately flat with the year-ago period at $82.6 million. (Revenue from the two segments adds up to slightly more than the company's total reported revenue due to the effect of a small revenue elimination, which excludes the sale of goods and services between the two business units.)
• Within the U-Haul segment, self-moving equipment rental revenue grew 8.9% year over year to $626.1 million.  
• Within the U-Haul segment, self-storage revenue jumped 13.7% year over year to $93.4 million. "The growth in revenues and square feet rented comes from a combination of improved rates per square feet, occupancy gains at existing locations and from the addition of new facilities to the portfolio," Amerco said in the earnings release. 
• Self-storage room count grew to about 411,000 at the end of the quarter compared to about 352,000 at the end of the year-ago period.
• Average occupancy rate based on room count was 68%, down from 70.9% in the year-ago period.
• DIY moving and self-storage product and service revenue rose 4.8% year over year to $55.7 million, while property management fees declined 20% to $7.9 million. These are fees the company collects from managing self-storage units owned by others.
• The U-Haul segment's operating income declined 58% year over year to $119.9 million. 
• The insurance segment's operating income edged up 2.5% from the year-ago period to $18.4 million. (Operating income from the two segments adds up to slightly more than the company's total reported operating income due to the effect of the small revenue elimination previously mentioned.) 

What management had to say

Here's what CEO Joe Shoen had to say in the press release:

Cutting through all of the unique financial events from the third quarter of last fiscal year, we have made progress toward improving profitability. I believe that we can do better. Discretionary personnel bonus amounts that were recognized in the second quarter last year have yet to be determined. Fleet repair and maintenance is still not where I want it.

In its earnings release, Amerco addressed fleet maintenance and repair costs, which have been a main reason for the company's struggles to grow profitability in recent years:

Fleet maintenance and repair costs decreased $10.3 million in the third quarter of fiscal 2019 compared with the same period last year primarily related to the decrease in the number of trucks sold.

Looking ahead

Amerco's financial performance isn't back to its level of a few years ago. However, its profitability improved in the quarter thanks to a combination of solid revenue growth and operating costs being kept under better control.

Amerco doesn't provide guidance.