U-Haul's fiscal second quarter should look like a rebound on paper. A year ago, this period carried a roughly $38 million loss on retired rental equipment, the low point of an over-fleeting and depreciation problem that dominated the past year. Last quarter, that line flipped to a small gain. The harder question for this report is whether the recovery is real at the operating level, or whether a new freight-cost problem in the UBOX business and continued pressure in storage occupancy are quietly offsetting it. The stock's sharp decline since the last report suggests the market has already leaned toward the skeptical view.
Wall Street expects earnings of $0.84 per share on revenue of about $1.81 billion. That implies EPS growth of roughly 71% on revenue growth of about 5%, a gap that tells you most of the expected improvement is about cost and depreciation normalization rather than demand. Revenue growth in the mid single digits is respectable for the busy summer moving season, but it is not the story. The story is whether the earnings drag from fleet economics is truly lifting. With no formal guidance on the table, the bar is set entirely by that consensus figure and by management's prior commentary.
That commentary pointed in an encouraging direction. Management said the increase in fleet depreciation had nearly stopped growing after April, as last year's step-up in cargo-van depreciation rates lapped, and it reiterated that depreciation should ease through the back half of the year. Validation this quarter would be a flat to lower depreciation line and another non-negative result on equipment disposals. The caveat is resale pricing: management called recent strength in used cargo-van values temporary and said it was already receding. If disposal results slip back into losses, the central reason for optimism weakens considerably.
The newer risk is freight. Last quarter brought about $22.5 million in added shipping costs, largely from moving UBOX containers, and management expected that pressure to peak in July before lingering for the rest of the year. Because this quarter includes July, it should capture the worst of it. Investors should look for evidence that the pricing adjustments management was weighing on UBOX are starting to work, and that UBOX revenue is growing faster than the roughly 1% pace reported last quarter. Late shipments had also strained customer satisfaction, so any sign that the service fix has held matters. Meanwhile, EBITDA margin fell more than a point and a half last quarter as personnel, repair and liability costs climbed. Stabilization there would go a long way.
Self-storage is the slower-moving test. Revenue per occupied foot rose more than 6% last quarter, but same-store occupancy sat at 88.3%, down about 456 basis points as the company cleared delinquent tenants. Management said net move-ins were picking up. A narrowing of that occupancy decline would suggest the cleanup is nearing its end.
The market has punished the shares since the last report, with the stock down about 26% while the S&P 500 was flat, giving back much of the rally that followed the $350 million buyback announcement. At $55.62, it trades below its 200-day moving average of $58.39 and just above its post-earnings low of $54.85. Sentiment has cooled too, with bullish readings falling to about 13% from 30% heading into the prior report. Expectations, in other words, are modest, though roughly $242 million in remaining buyback capacity gives management a tool if the price stays depressed.
Ultimately, this report will be judged on whether lower depreciation and steady disposal results outrun the freight hit at its peak. If they do, the fleet turnaround narrative stays intact. If freight and margin pressure absorb the gains, the recent selloff will look justified.