UHAL Maintains Moderate Buy Rec

AMERCO Inc. (UHAL) is the parent company of U-HAUL International, the largest consumer truck rental company in the world. It is also the second-largest self-storage company in North America.

The problems of the auto industry have impacted AMERCO's revenue and earnings. Self-Moving revenue was slightly below our estimate ($390A vs. $400E) as was pretax income ($48 vs. $50). We expect some of the problems to continue and have adjusted our numbers. We rate the stock a Buy and reduced our price target to $60 a share.

As suggested in our 4Q08 report, discounting was less in the June quarter. This reduction may also have been due to the Budget rental trucks cutting back on discounting due to its impact on revenue. Avis Budget Group Inc. (CAR) reported an 8% decline in truck rental revenue despite an increase in rental days.

Revenue was impacted by problems at General Motors (GM). Production cutbacks and a strike at a major parts supplier meant that Uhaul did not receive the expected number of new trucks. This caused a slight reduction in fleet size which reduced revenue by about $7 to $10 million (Zacks estimate).

The increase in commissions suggest that the company dealers were hit worse that the affiliated dealers. Uhaul was unable to cut back on vehicle sales enough to compensate for the lack of new trucks. Since older trucks have higher repair costs than new trucks, keeping the old ones in service would reduce margins slightly. Of greater impact is the decline in used truck prices as a result of the increase in petrol prices and consumers selling trucks in favor of smaller vehicles.

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