Rush Enterprises posts revenue gain on strong used-truck sales, aftermarket business

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Rush Enterprises posted an increase in second-quarter revenue buoyed by strong used-truck sales and significant growth in its aftermarket business, which accounts for 64.8% of the company’s gross profits.

Rush (NASDAQ: RUSHA) announced revenues of $1.349 billion and net income of $29.4 million, or $0.72 per diluted share, compared with revenues of $1.204 billion and net income of $22.0 million, or $0.54 per diluted share, in the quarter ended June 30, 2017. The company incurred a pre-tax charge to amortization expense and a charge to selling, general and administrative expense totaling of $10.7 million, or $0.20 per diluted share, associated with the upgrade and replacement of certain components of the Company’s Enterprise Resource Planning software platform (ERP Platform). 

“We are extremely proud of our exceptional performance this quarter and our teams who worked hard to achieve it,” said W.M. “Rusty” Rush, Chairman, CEO and President of Rush Enterprises, Inc. “Additionally, I am pleased to announce the approval of our first ever cash dividend this quarter, which reflects our confidence in the company’s future performance. Our strategic initiatives continue to have a positive impact on our financial results, which were further strengthened by widespread activity across the commercial vehicle market and strong general economic conditions.” 

While used trucks and aftermarket powered growth, the company saw a decline in the second quarter in new Class 8 retail sales of 3,218 units, accounting for 5.3% of the U.S. Class 8 truck market. While Class 8 retail sales totaled 60,812 in the quarter – a 24.7% increase according to ACT Research – Rush’s sales were off slightly, although they remain up year to date Rush said.

“Our new Class 8 truck deliveries were down slightly in the second quarter, primarily due to truck and component manufacturer production constraints,” he said. “However, our new Class 8 truck deliveries are up 7.8% year to date as compared to the same time frame last year. The healthy economy created significant activity in virtually all market segments and especially strong demand from over-the-road, construction and refuse customers.”

Used-truck sales climbed 18% year-over-year to 2,055 units and should benefit through the year due to the long lead times – 8-9 months currently – to acquire new vehicles Rush said. “We believe this will help stabilize used truck values and help lessen the impact of the large number of used trucks entering the market through the rest of the year,” he noted.

Rush added that Class 8 sales will accelerate in the second half, although production constraints will push some deliveries into 2019.

The company sold 3,474 Class 4-7 medium-duty commercial vehicles in the second quarter, an increase of 13% compared to the second quarter of 2017, and accounted for 5.3% of the U.S. Class 4-7 commercial vehicle market. ACT is forecasting a 3.8% increase in Class 4-7 vehicles in 2018.

In the Aftermarket Solutions division, Rush reported revenues of $422.0 million, up 15.4% compared to Q2 2017. “Our strong aftermarket performance was driven by our strategic initiatives, particularly through additions to our aftermarket sales organization, focus on our all-makes and Rig Tough parts growth, and investment in technology and productivity improvements for our Parts operations. Our results were further supported by robust activity across the United States,” Rush said. “We also added 300 technicians to our organization over the past year, significantly expanding our service capabilities throughout the country. Mobile technicians make up a significant portion of this growth, illustrating our abilities to serve customers no matter where and when they need us.”

During the second quarter of 2018, the Company repurchased $8.0 million of its common stock and ended the quarter with $148.3 million in cash and cash equivalents.

“We are confident in our long-term profitability, which is reflected in our decision to announce a cash dividend. We remain well-positioned to invest in our strategic initiatives while returning capital to our shareholders,” Rush added.