Bullish on UHAL Up to $80

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 N. America. Unprecedented number of calamities led to marketing opportunities. Truck rental seems to be picking up earlier this year. In April alone there have been six disasters, three fires, two tornados and a major storm. U-Haul (as it usually does) has offered 30 days of free storage to the victims of these events.

Seldom in any given area are storage facilities at 100% occupancy so giving free storage does not cause an opportunity cost. Since a number of victims are likely to keep the storage longer than 30 days the net result is a higher paid occupancy. Our local survey of company owned facilities suggest that truck rental transactions are higher than normal (at least in San Diego and Orange counties in California). There seem to be more trucks on the road than we normally see at this time of year.

The stock has usually been valued on EBITDAL (EBITDA plus lease expense) per share, selling between two and three times EBITDAL. Based on our estimates for fiscal 2009 EBITDAL of $27 a share we would expect a price range of $54 to $81, with a potential move to the $90 level as earnings growth resumes. We rate the stock a Buy and our price target remains at $80 a share.

At Baker Hughes, Expect Strength

We are maintaining our Buy recommendation on Baker Hughes, Inc. (BHI) shares following the company's quarterly results, which came in below our estimate which was above consensus. Baker Hughes shares trade at a discount to its peers despite the company's strong oilfield service franchise and growing international footprint. The company enjoys strong leverage to the current oilfield cycle, being the leader in a number of product and service categories. More than 70% of Baker Hughes revenue comes from products and services where it has the highest or second highest market share.

Management has made steady progress over the last few years in repositioning the company by divesting non-core assets and instituting greater capital discipline. The variance from our estimate was largely due to higher costs. While we have lowered our 2008 ($5.28 vs. $5.45) and 2009 ($6.15 vs. $6.30) earnings estimate, our long-term outlook continues to remain positive.

We expect strong, powered by an improved North American outlook and continued international expansion. Being a premium oilfield service player, the company remains well positioned to capitalize on the current oilfield cycle.

On relative valuation grounds, Baker Hughes shares are attractive at current levels, compared to its large-cap peers. We believe that the new Baker Hughes deserves a relatively modest valuation discount to Schlumberger (SLB), if at all, compared to the current level. This is the primary reason for our continued positive outlook for the stock. Our unchanged $90 price objective is based on 2008 P/E and EV/EBITDA multiples of 17.1x and 11.3x, respectively. Our target multiples are well within historical trading ranges for the stock.

Keep Clear of LoopNet, Near-Term

We reiterate our Sell rating on shares of LoopNet, Inc. (LOOP) following the release of Q1 financial results. Although the company owns the leading online commercial real estate marketplace, we believe that a challenging near-term operating environment will curtail share price appreciation. Continuing macroeconomic challenges will likely put stress on the commercial real estate sector, in our opinion, as slower economic growth combined with tight access to debt capital may limit transaction activity.

Given our outlook for a slowing rate of revenue growth and relatively flat earnings growth over the next two years, we believe that a lower multiple is appropriate at this time. Shares of LOOP currently trade at 26.1x and 22.5x our 2008 and 2009 earnings per share estimates, respectively. Excluding the estimated $67 million in cash currently on the balance sheet, the shares are trading at 22.5x our 2008 EPS estimate and 19.4x our 2009 estimate.

Given these uncertainties, we recommend avoiding shares of LOOP at current levels. While we consider the company to be the dominate force in the online commercial real estate market, we do not see a near-term catalyst that would justify a higher share price at this time.

We note that the earnings guidance maintained by the company for the full year 2008 was below the current Street consensus. The earnings guidance was unchanged from management's previous guidance, despite the fact that the company repurchased more than 9% of the company's outstanding common stock during the first quarter. Our price target of $11 per share reflects a multiple of approximately 16x our 2009 earnings per share estimate, plus cash on the balance sheet.