U-Haul Parent Amerco's Profitability Continues to Move in Right Direction

U-Haul parent Amerco (UHAL 0.25%) reported its fiscal fourth-quarter and full-year 2019 results for the periods ended March 31 after the market closed on Wednesday, May 29.

Shares closed down 2.1% on Thursday. They've returned 15.4% so far in 2019 versus the S&P 500's 12.2% return.

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.

The revenue decline in the quarter was due to the company's life insurance subsidiary terminating a reinsurance agreement. Adjusted earnings for the year-ago period exclude a benefit from U.S. tax reform of $16.5 million, or $0.84 per share. 

There's only one Wall Street analyst who provided an earnings estimate and two who provided revenue estimates, so the "consensus" estimates have even less value than usual for long-term investors. (The Street has a short-term focus.) That said, for context, the Street was looking for adjusted EPS of $0.11 on revenue of $789.2 million in the quarter. So Amerco fell short on both the top and bottom lines.  

For fiscal-year 2019, revenue increased 4.7% to $3.77 billion, GAAP EPS declined 53% to $18.93, and adjusted EPS rose 27% to $18.93. Adjusted earnings for fiscal 2018 exclude a benefit from U.S. tax reform of $355.7 million, or $18.16 per share, and a benefit of $7.34 per share from the sale of a portion of the Chelsea, New York property.

What happened with Amerco in the quarter?

• Revenue in the U-Haul segment, which accounted for about 101% (not a typo, as will be clear in next bullet point) of the company's total revenue, increased 7.6% from the year-ago period, to $732.1 million. 
• Revenue in the insurance segment (comprised of one property-casualty and one life insurance company) dropped to negative $5.9 million from $79.3 million in the year-ago period. This was due to the life insurance subsidiary terminating a reinsurance agreement. (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 that excludes the sale of goods and services between the two business units.)
• Within the U-Haul segment, self-moving equipment rental revenue grew 7% year over year, to $529.0 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. Moreover, as with last quarter, revenue in the company's corporate account business improved year over year. 
• Within the U-Haul segment, self-storage revenue jumped 14% year over year, to $96.2 million.
• Self-storage room count grew to about 428,000 at the end of the quarter, compared to approximately 366,000 at the end of the year-ago period.
• Average occupancy rate based on room count was 66.9%, down from 68.9% in the year-ago period.
• DIY moving and self-storage product and service revenue was approximately flat with the year-ago period, at $56.3 million, while property management fees rose 8.4%, to $6.6 million. These are fees the company collects from managing self-storage units owned by others.
• The U-Haul segment's operating income came in at $13 million, up from a loss of $10.9 million in the year-ago quarter.
• The insurance segment's operating income edged up 2.2%, to $14.5 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 earnings release:

We did a better job of meeting consumer needs for our rental equipment and self-storage products over the course of this fiscal year. Our pace for filling storage units and our truck sales efforts are improving. We will continue to work to retain the loyalty of our customers and team members.

On the earnings call, Shoen said:

[Fleet repair expense] remained higher than I'm comfortable with. We are presently revamping or expanding five large repair hubs. This should help our results 12 to 18 months down the road.

Looking ahead

Reiterating what I wrote last quarter, "Amerco's financial performance isn't back to its level of a few years ago. However, its [year-over-year] profitability improved in the quarter thanks to a combination of solid revenue growth [in its core U-Haul business] and operating costs being kept under better control."

The company doesn't provide guidance.