Upon reading the major highlights of the latest jobs report, investors might be less guarded about the future. However, the most recent earnings report from moving and storage services provider U-Haul (NYSE:UHAL) implies that the company may be an economic harbinger. Stated bluntly, if circumstances really were auspicious, U-Haul should print much more robust figures. As a result, I am bearish on UHAL stock.
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UHAL Stock Should Make Sense, But It Doesn’t
Fundamentally, the main contention for UHAL stock centers on its performance in the charts. If the latest data is to be believed at face value – basically that anyone who seeks employment can readily find it – then enterprises specializing in self-moving truck and equipment rentals should blossom. Instead, UHAL is down more than 6% for the year, while the S&P 500 index is up over 12%. It doesn’t make sense.
Actually, it does make sense if you consider that the post-pandemic recovery – if it can even be called that – may, at best, be patchy. Consider that since 2022, the economy has endured blistering inflation, a rise in mass layoffs, and, more recently, a regional banking crisis. It stretches credulity to assume that the U.S. (even being the sole superpower) can absorb such body blows without serious consequences.
One of those consequences could be that the working class (that is, anyone that works or runs a business out of necessity) may be forced to permanently accept a conspicuously lower standard of living. Of course, you’re probably not going to hear such a message from mainstream media outlets. However, that’s the reality that the underperformance of UHAL stock signals.
Honestly, the matter comes down to common sense. People move about not only for fresh opportunities but also because they feel confident in making the decision. Unfortunately, with consumer sentiment still in the weeds relative to pre-pandemic norms, folks simply lack the confidence to actualize opportunities.
That’s bad news for UHAL stock, but it might be even worse for the rest of the economy.
U-Haul’s Earnings Print Tells All
To clarify, U-Haul doesn’t represent a possible economic harbinger simply because UHAL stock fell into red ink. Sure, that’s part of the narrative. However, the bigger concern is that investors who dumped out of UHAL command justification for doing so. It’s all in the latest earnings print.
For its fiscal fourth quarter of 2023 (ended March 31, 2023), U-Haul posted total consolidated revenue of $1.188 billion. This tally represented a shortfall of 0.8% against the year-ago quarter’s result of $1.198 billion. Unfortunately, Wall Street’s consensus target called for sales of $1.2 billion.
Here, management called attention to the struggles related to the self-storage industry relative to the early years of the pandemic. Still, the company managed to build and fill new units. Specifically, self-storage revenues in Q4 2023 hit $195.2 million, up 17% from the $166.8 million posted one year ago.
In many cases, storage units allow people to downsize their residences, thus facilitating lower rental costs. So, an increase in this line item wasn’t surprising. However, for U-Haul’s self-moving equipment rental business, this line item slipped 5.5% year-over-year to $726.3 million.
The data shows that people aren’t moving, and it’s no wonder why. With inflation soaring relative to historical norms, the Federal Reserve acted aggressively, raising the benchmark interest rate. This hawkish monetary policy obviously lifted borrowing costs, stifling home purchases for families of normal means.
Put another way, mobility in the U.S. has suffered a deflationary shock. Almost invariably, if this circumstance is not corrected, the headwind could affect other components of the economy. Therefore, UHAL stock may be signaling a message that few people want to hear.
Hedge Funds Not Confident in U-Haul Stock
When it comes to “smart money,” money managers don’t seem to be all that confident in UHAL stock either. Indeed, hedge funds decreased their holdings in the stock by 17,400 shares in the past three months. As a result, their confidence signal is currently rated as Neutral, as indicated by the graphic below.
The Takeaway: UHAL Stock Represents the Pulse of the Economy
Looking at recent headlines, investors might assume that the U.S. may have turned a corner. With the labor market printing a hotter-than-expected framework, a recession seems unlikely. However, if you were to take the good news at face value, you would reasonably expect U-Haul to perform well. After all, a robust workforce, first and foremost, signifies confidence in the economy and conviction in future opportunities.
Given this reality, UHAL stock should thrive as workers branch out. Instead, the opposite is happening, which is why investors should keep watch on UHAL, even if they don’t own shares.
