Image source: Amerco.

Amerco (NASDAQ:UHAL) 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 (NYSE:PSA), 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.