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Rush Enterprises (NASDAQ: RUSHA) reported lower new and used truck sales in 2020 because of COVID-19. But Class 8 business improved in the fourth quarter as freight demand brought a surge in equipment orders.
The nation's largest chain of dealerships sold 10,670 new Class 8 trucks at retail, a decrease of 28.8% compared to 2019. It accounted for 5.5% of the new U.S. Class 8 market. Industrywide, Class 8 retail sales were down 30.5%, according to ACT Research.
"Our Class 8 new truck sales results were consistent with the industry in 2020," Rush Enterprises CEO W.M. "Rusty" Rush said in a press release. "As we entered the fourth quarter, solid consumer spending and strong freight rates led to increased demand for new trucks, especially from over-the-road customers."
Fourth-quarter sales increased 22% over the third quarter, significantly outpacing the industry.
ACT projects U.S. retail Class 8 sales to total 243,000 this year, up from 195,687, or 24.2% higher than 2020.
"With housing, automotive and consumer spending expected to remain strong, we believe that our Class 8 new truck sales will generally align with the industry in 2021," Rush said.
Parts shortages, specifically semiconductors, are likely to impact new truck production this year, Rush said on a conference call with analysts Thursday.
"Everything we deal with — I don't care if it's a toaster or a TV — everything's got chips in it. I'm concerned that some Tier 3 suppliers may be affecting Tier 2 suppliers to the [manufacturers] in different ways," he said.
Combined with the fastest ramp-up for new truck production in 30 years, the shortage of chips and other components is inevitable.
"When you look at what happened with acceleration with trucks, we've had big, volatile markets that go up," Rush said. "But not that fast. A lot of the lead time on some of [these parts] is 20, 25, 30 weeks. I've got concerns. But this doesn't dampen demand. I think the supply side will catch it."
Medium-duty and used trucks took sales hit
Rush posted a greater-than-industry decline in medium-duty truck sales. It sold 11,311 new Class 4-7 medium-duty commercial vehicles in 2020, down 21.8% compared to 2019. Medium-duty sales across the industry were 232,042 units, down 13.1% compared to 2019. Rush accounted for 4.9% of the total U.S. market.
The pandemic impacted equipment sales for rental and lease and commercial food service customers. Much of the decline was due to the timing of fleet deliveries, Rush said, adding that the lease and rental business improved in the early weeks of 2021.
Medium-duty sales are expected to rebound this year to 249,500 units, 7.5% higher than 2020.
Rush sold 7,400 used vehicles in 2020, a 4.4% decrease compared to 2019. Used truck values rose about 15% from their low point in the second quarter.
"We expect used truck values and demand to remain strong during 2021," Rush said.
By the numbers
Q4 revenues totaled $1.3 billion, unchanged from the fourth quarter of 2019. Net income for the quarter ended Dec. 31, 2020, was $41 million, or 72 cents per diluted share, compared to $23.8 million, or 42 cents in the year-ago quarter.
For the full year, revenues totaled $4.7 billion, compared to $5.8 billion in 2019. Net income was $114.9 million, or $2.04 per share, compared with $141.6 million, or $2.51 in 2019.
Total new and used commercial vehicle sales totaled 30,513, a 22.6% decrease from 39,416 units in 2019.
Rush expects costs to rise in the first quarter based on restoring employee salary cuts and awarding $500-per-employee bonuses in Q4.
The Rush board of directors approved a $100 million stock repurchase plan through 2021 following the buyback of $24.8 million of its common stock in 2020. Rush raised its dividend per share to 18 cents, up 29% over the third quarter. The $22.5 million paid to shareholders during 2020 was up 22% year over year.
Locomation platooning maintenance
Separately, Rush said Wednesday it will become the primary installation and maintenance provider through its Rush Truck Centers for startup Locomation's human-guided truck platooning platform.
The two-vehicle, driver-guided convoy system is being validated by professional truck drivers for safety and efficiency, Locomation officials said in a press release.
"Locomation is developing an autonomous platform that appears to be a commercially viable approach for the trucking industry," Rush said.
On the earnings call, Rush said he sees Level 4 autonomous operations with a driver on board but not fully engaged being three to five years out.
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