Amerco Earnings: U-Haul's Results Keep Rolling Along as Self-Storage Business Grows

Image source: Amerco.

Amerco (UHAL -1.05%) reported its fiscal second-quarter 2016 earnings after the market closed on Wednesday. The parent company of do-it-yourself moving giant and self-storage player U-Haul, which also has two insurance company subsidiaries, experienced solid revenue and earnings growth. 

Shares of Amerco traded flat on Thursday. The stock has returned more than 49% during the past year compared to the market's less than 7% return.

Amerco results: The key quarterly numbers

Data source: Amerco.

It's a big positive that earnings are accelerating faster than revenue, as it means profit margins are expanding. Amerco doesn't break out margins in its U-Haul segment, which includes the DIY moving and self-storage businesses.

However, we can safely infer from competitors' margins that Amerco's much smaller self-storage business sports considerably higher margins. Thus, Amerco's overall margins are expanding because its self-storage business is growing faster than its moving business. Given the relative sizes of the two businesses and their market penetrations, this dynamic should continue.

What happened with Amerco this quarter?

• Revenue in its U-Haul segment, which accounted for more than 92% of total revenue, increased 6.2% from the year-ago period, to $888.3 million.
• Revenue in its property-casualty and life-insurance segment grew about 5.8%. (Overall company revenue growth was 6.2%. The numbers/percentages from the two segments don't add up exactly due to how the company reports results.)
• DIY-moving equipment rental revenue increased 6.8% from the year-ago period, to $698.2 million. Revenue and transactions from both the "in-town" (two-way rental) and one-way rental markets increased.
• Self-storage revenue increased 17%, to $62.1 million. The number of rooms rented continues to increase due to acquisitions and improvements in occupancy rates at existing locations. During the last year, Amerco has added approximately 2.7 million net rentable square feet to its owned self-storage portfolio, with more than 1.3 million of that added during the second quarter. Total occupancy rate was a strong 84% in the quarter, flat with the year-ago period's 84.1%.
• DIY-moving and self-storage product and service sales revenue increased 3.9%, to $70.7 million, while property management fees grew 9%, to $6.3 million. These are fees the company collects from managing self-storage units owned by others.
• Operating income in the U-Haul segment increased 14.1%, to $297.1 million. Operating margin expanded from 31.2% to 33.4%.
• Operating income in the insurance segment decreased 8.9%, to $14.1 million. Operating margin contracted from 21.6% to 18.6%.
• On Aug. 28, the company declared a cash dividend of $3 per share of common stock to holders of record on Sept. 16. The dividend was paid on Oct. 2.

What management had to say
Said CEO Joe Shoen, "We continued to see revenue growth in all major segments. Competitors continue to assert themselves. We aim to make U-Haul the customer's best choice in both self-move and self-store. I continue to view this as a long journey requiring sustained effort."

Looking forward
Amerco doesn't provide guidance, and there are only two analysts who follow the stock. So we don't have much to go on in the way of future expectations. That said, the company is the 800-pound gorilla in the DIY-moving business and a significant player in the high-margin self-storage business. As long as it continues to execute well and continues to nicely grow its storage business, the stock should keep trucking along.