Please ensure Javascript is enabled for purposes of website accessibility

Amerco's Q4 Earnings Cruise Up 10.3% as Self-Storage Continues Its Strong Growth

By Beth McKenna - May 26, 2016 at 10:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The profit margin for the parent company of U-Haul, the industry leader in the do-it-yourself moving industry, once again expanded thanks to its growing self-storage business.

Image source: Amerco.

Amerco (UHAL -0.61%) reported its fourth-quarter and full-year fiscal 2016 earnings after the market closed on Wednesday. The parent company of do-it-yourself moving titan and growing self-storage player U-Haul, which also has two insurance company subsidiaries, posted year-over-year revenue growth of 6.2%, while adjusted earnings expanded 10.3%.

Shares of Amerco were down 3.4% in after-hours trading on Wednesday. While the company turned in solid results, the market may be reacting to the fact that bottom-line growth wasn't as strong as it's been in recent quarters, and fell slightly short of the lone analyst estimate. Another possible reason is that occupancy rates in the self-storage business declined once again from the year-ago period. 

The stock has returned 15.1% for the one-year period through Wednesday, trucking by the S&P 500's return of less than 1%, though lagging the 34% total return of Public Storage (PSA 0.10%), the leader in the higher-margin self-storage industry. However, Amerco remains firmly in the lead over the five-year period, with its 374% return trouncing Public Storage's 161%, as well as the broader market's 77% return.

Amerco's key quarterly numbers


Fiscal Q4 2016

Fiscal Q4 2015

Growth (YOY)


$683.2 million

$642.7 million


Net income

$52.6 million

$9.5 million


GAAP earnings per share (EPS)




Adjusted EPS




Data source: Amerco. GAAP = generally accepted accounting principles. YOY = year over year. 

For full-year fiscal 2016, Amerco's revenue increased 6.5% to $3.28 billion, while adjusted EPS rose 23.7% to $24.95.

GAAP earnings were suppressed in the year-ago period because the company incurred an after-tax expense of $1.96 per share associated with its accrual of $60.7 million for the PODS Enterprises Inc. (PEI) litigation. A jury found in late 2014 that Amerco infringed on storage company PEI's trademarks by repeatedly using the word "pods" in its marketing materials for its U-Box home storage program. 

As was the case in at least the last two quarters, earnings accelerated faster than revenue, indicating that profit margin expanded. This expansion is the result of the higher-margin self-storage business growing faster than the self-moving business. (Amerco doesn't break out operating margins in its U-Haul segment, though based on competitors' margins, it's safe to assume the storage business sports a considerably higher margin than the moving business.) 

Long-term investors shouldn't give too much power to analysts' estimates in general, as Wall Street is focused on the short term. This is especially true with Amerco, as there is only one analyst that provides earnings estimates. He or she was projecting earnings of $2.70 per share, so Amerco fell a tad short.

What happened with Amerco this quarter?

  • Revenue in the U-Haul segment, which accounted for about 89% of total revenue, increased 6.1% from the year-ago period to $608.6 million.
  • Revenue in the insurance segment (comprised of one property-casualty and one life-insurance company) rose 7.7%.
  • DIY-moving equipment rental revenue increased 5.4% from the year-ago period to $453.0 million.
  • Self-storage revenue increased 18% to $65.5 million -- it now accounts for 9.6% of total revenue. Room count increased to 275 at the end of the quarter compared to 232 at the end of last year's quarter. Average occupancy rate based on room count declined to 76.1% from 79.5% in the year-ago period. This also represents a sequential decline, as the occupancy rate was 78.4% last quarter. This is still quite a solid occupancy rate, but we've now had two quarters of year-over-year declines, so investors should watch this number going forward. If this trend continues, we could see Amerco's pricing power softening. For context, industry leader Public Storage had an occupancy rate of 93.9%, based on square footage, at the end of the quarter ending in March. 
  • DIY-moving and self-storage product and service sales revenue increased 1.8% to $53.5 million, while property management fees declined 6.9% to $5.9 million. These are fees the company collects from managing self-storage units owned by others. The dip is nothing to worry about since this revenue source accounts for less than 1% of total revenue. Furthermore, the downturn could be a blip, as the full-year result grew year over year.
  • Operating income in the U-Haul segment increased 329% to $91.4 million. (This huge jump was mostly due to the big PEI litigation charge contained in last year's fourth-quarter results.)
  • Operating income in the insurance segment increased 13.2% to $15.5 million. 

What management had to say 

CEO Joe Shoen said in the press release, "Our team made significant progress over the last year. The self-moving and storage marketplaces remain very competitive. We continue to invest time and resources today on initiatives that should benefit us in years to come."

Looking forward 

Amerco doesn't provide guidance, and there wasn't yet an earnings estimate available on Yahoo! Finance for the first quarter of fiscal 2017 at the time of this writing. 

Amerco's 6.2% revenue and 10.3% earnings growth in the quarter were solid, though investors have gotten used to stronger earnings growth. (EPS jumped nearly 23% last quarter.) Every quarter, though, can't be a standout. This company remains the heavyweight in the self-moving business, which provides it with a robust network effect. Additionally, its higher-margin self-storage business continues to grow faster than the core moving business, resulting in an expansion of its overall operating margin.

The primary thing investors should watch going forward is the occupancy rate in the storage business. Too much softening could indicate that the market is becoming oversaturated, which would probably be accompanied by increased price competition and lower operating margins.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AMERCO Stock Quote
$506.67 (-0.61%) $-3.10
Public Storage Stock Quote
Public Storage
$310.09 (0.10%) $0.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.