Revenue from parts and service more than covered the Q1 operating cost of Rush Enterprises Inc.’s (NASDAQ: RUSHA) chain of truck and bus dealerships, offsetting lower Class 8 truck sales.
The 122.6% absorption rate was nearly double the percentage of most car and truck dealers. The calculation is based on how much of a dealership’s operating cost is absorbed by fixed operations like service, aftermarket parts and collision repairs.
Fixed operations accounted for approximately 63% of Rush’s gross profit in the quarter. Parts, service and collision center revenues of $415.7 million were down 2.9% compared to the first quarter of 2020. But the absorption rate was up from 114.3% in Q1 2020.
“Much of our quarter-over-quarter aftermarket growth can be attributed to parts sales related to the continued economic recovery, as well as healthy aftermarket activity from our refuse, construction and public sector customers,” Chairman, CEO and President W.M. “Rusty” Rush said in a press release.
Service revenues are improving more slowly than parts, Rush said. And overall revenues took a hit because of winter storms in Texas and the southeast United States. Rush sells Peterbilt, International, Hino, Isuzu, Ford trucks and IC and Blue Bird buses.
The big picture
The nation’s largest network of commercial vehicle dealerships posted January-March revenues of $1.23 billion. Net income was $45.3 million, or 79 cents per diluted share. Year-ago revenues were $1.29 billion. Net income was $23.1 million, or 41 cents per share.
“Gradually increasing demand for aftermarket products and services, and strong demand for Class 8 new and used trucks contributed to our strong quarter,” Rush said. “While the COVID-19 pandemic is not over, business conditions have improved significantly and consumer spending remains strong.”
New truck sales decline
Rush sold 2,995 new Class 8 trucks across its more than 100 stores in 22 states in the first quarter. That was 2.7% fewer than in the first quarter of 2020. Rush accounted for 5.4% of the U.S. market for new Class 8 trucks. Industrywide, Class 8 sales of 55,402 in Q1 were up 13.9% over the first three months of 2020, according to ACT Research.
Large fleet deliveries in the year-ago quarter skewed the most recent quarter results, Rush said.
Supply chain constraints impacting truck manufacturers are likely to continue into the third quarter. A shortage of semiconductors used throughout trucks is prompting downtime and the parking of unfinished trucks at manufacturing plants.
But new truck demand — evident in six consecutive months of orders exceeding 40,000 units — suggests accelerating sales and higher market share through the end of 2021, Rush said.
Used truck sales up 23.5%
Rush sold 1,924 used trucks in Q1, up 23.5% year over year. Values were about 10% higher than the last quarter of the year, driven by new truck production constraints. Customers who wanted new trucks were willing to buy late-model used units to keep up with strong freight demand. Used truck supply is tight, but Rush said his inventory is in good shape.
“Though demand and pricing may soften somewhat as more new commercial vehicles are available, we believe overall used commercial vehicle values and demand will remain strong through 2021,” he said.