Amerco Hits All-Time Highs As It Finally Shows Operating Leverage

Jan. 21, 2021 5:45 AM ETU-Haul Holding Company (UHAL)PSA3 Comments
The Stock Stooge profile picture
The Stock Stooge
1.2K Followers

Summary

  • Amerco (U-Haul) hit all-time highs as the most recent quarter finally showed operating leverage in the model.
  • Dramatic capex cuts in 2020 will be reversed, but the company has brought operating expenses under control.
  • If the company can keep operating expenses under control and continue to increase same-store self-storage occupancy, it's a buy.

Amerco (NYSE:UHAL), the parent company of U-Haul truck and trailer rentals and self-storage, has been a somewhat frustrating investment over the last five years. After rocketing from around $100 in 2011 to $400 in 2015, the stock was flat to down through the end of 2019.

2015-2019 Disappointing Years

The poor stock performance from 2015 to the beginning of 2020 coincided with poor operating performance and very high investments. Investors began to perhaps fairly question whether the business model was simply not that good; would U-Haul require ever-increasing amounts of capital with nearly no operating leverage to show for it? Looking at the financial results below is sobering, as it shows revenues increasing by 21.5% over the five year period while expenses increased 42.8%. The main culprit, as you can see, is lackluster growth in self-moving rental and product revenue and very high growth in operating expenses and depreciation. The growth in depreciation was due to significant increased investment in both trucks and trailers and the buildout of self-storage facilities.

(Source: 10-K)

As a result of the high capex spending, Amerco was able to increase its moving equipment fleet from 161,000 trucks, 118,000 trailers and 42,000 towing devices at March 31, 2018 to 176,000 trucks, 127,000 trailers and 41,000 towing devices at March 31, 2020 (see 10-K). The more significant increase in PP&E related to self-storage real estate and facilities. Here the growth has been dramatic, with square footage increasing from 31 million square feet at March 31, 2018 to 42.1 million square feet at March 31, 2020.

To put this 11.1 million square foot addition in self-storage in perspective, Public Storage (PSA), the largest self-storage REIT, had 143.9 million net rentable square feet as of September 30, 2020 in its same store facilities, so U-Haul has added

This article was written by

The Stock Stooge profile picture
1.2K Followers
Investor and corporate finance lawyer.  My goal is to bring insights from years of drafting SEC filings and agreements into company research.  Formerly wrote under The Stock Stooge.

Disclosure: I am/we are long UHAL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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