Rush Enterprises plans 3:2 stock split following strong Q2
Rush Enterprises, the nation’s largest network of new truck dealerships, will execute a 3:2 split on Class A and B shares after a strong second quarter led by its parts and service business.
The split means shareholders will receive an additional one-half share for each common share held as of Aug. 7.
Rush reported $2 billion in revenue and net income of $98.3 million, or $1.75 per diluted share. That compares with revenues of $1.8 billion and net income of $110.2 million, or $1.92, in the year-ago quarter. Rush had a $9.8 million one-time gain from purchasing 30% of Rush Truck Centres of Canada in Q2 of 2022.
The company’s absorption ratio of 139.7% reflects how much of its operating cost was covered by fixed operations. Those include areas like service, aftermarket parts and collision repairs. Anything above a 100% absorption ratio becomes profit.
Aftermarket products and services made up about 59.9% of the company’s Q2 total gross profit. Parts, service and collision center revenues reached $651.1 million.
“We believe our focus on achieving operational efficiencies and our commitment to long-term strategic initiatives will cause our aftermarket financial results to remain strong this year,” CEO, President and Chairman W.M. “Rusty” Rush said in a news release.
Class 8 truck sales rise modestly while medium-duty purchases surge
Rush has more than 150 locations in 23 states and Ontario, Canada. It sold 4,300 new Class 8 trucks in Q2. That was 3.2% more than in Q2 of 2022. Rush accounted for 5.7% of the new U.S. Class 8 truck market and 1.8% of the Canada new Class 8 truck market.
“Over-the-road customers, which is our largest customer segment, are dealing with significant pressure from high interest rates, low freight rates and depressed used truck values,” Rush said.
That is particularly tough on small over-the-road carriers and it has limited overall aftermarket commercial vehicle industry growth. Rush is focusing on growing national accounts to buy its allocations of new trucks from Peterbilt and International.
“Due to limited truck production over the past few years, we continued to experience strong widespread demand for new commercial vehicles,” he said. “We are seeing demand from customers seeking new commercial vehicles ahead of emissions regulations and associated price increases beginning in 2024.”
Pulling ahead purchases of current model trucks allows fleets to avoid paying higher prices for trucks required to have more sophisticated emissions-control equipment.
Class 4-7 commercial vehicle sales rose 23.5% in Q2 to 3,477 units. That was good for 5.2% U.S. share and 2.6% of the new Canada Class 5-7 commercial vehicle market.
Supply constraints and used truck values are still issues
Supply constraints are still negatively impacting new truck production. Coupled with supply issues at bodybuilding companies, new truck deliveries may fall in the current quarter.
“However, we expect that production will continue to normalize, and demand for new commercial vehicles will remain strong this year,” Rush said.
The rate of depreciation in used trucks slowed in Q2 when Rush sold 1,869 used commercial trucks, 14.7% more than the 1,629 sold in the same quarter in 2022.
“Looking ahead, with new truck production continuing to increase and with freight rates not expected to improve this year, we believe used truck demand and values will remain low through 2023,” Rush said.
That means Rush outlets will continue to maintain lower-than-normal used truck inventory levels until demand and values improve.
Related articles:
Parts sales drive Q1 profits at Rush Enterprises
Used truck prices: What was up has come down, way down
Rush Enterprises caps used truck inventory
Click for more FreightWaves articles by Alan Adler.
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