Rush Enterprises Inc., the largest dealer network of commercial vehicles in North America, reported lower earnings and higher sales in the third quarter. But the company warned that a glut of used trucks is causing faster-than-normal depreciation and is hurting sales.
San Antonio, Texas-based Rush (NASDAQ: RUSHA) reported net income of $39.1 million, or $1.05 per diluted share, on revenue of $1.6 billion compared with net income of $41.7 million, or $1.03 per diluted share on revenue of $1.38 billion in the same quarter of 2018. The report came after the markets closed on October 23.
Aftermarket products and services accounted for approximately 64.4% of the company's total gross profits in the third quarter. Parts, service and collision center revenues reached $454.8 million, up 6.5% compared to the third quarter of 2018.
"We expect industry demand for aftermarket products and services to remain steady in the fourth quarter, subject to typical seasonal softness through the winter months," said Chairman, CEO and President W.M. "Rusty" Rush.
"With continued focus on our strategic growth initiatives, we expect our aftermarket parts and service sales to outperform the market in the fourth quarter of 2019 and for the full year 2020."
Class 8 Sales
Rush sold 4,318 Class 8 trucks in the third quarter, an increase of 29.9% compared to the third quarter of 2018. Rush accounted for 5.5% of the new U.S. Class 8 truck market. Most of the sales were in the over-the-road fleets and vocational segments.
ACT Research projects new U.S. Class 8 retail sales of 204,000 units in 2020, down 26% from a projected 277,300 units this year. The industry is returning to a normal replacement demand level from a frenzy of orders in 2018 juiced by federal business tax cuts and record freight demand.
"Although 2020 will be a challenging year for new Class 8 truck sales, we believe we are well-positioned to increase our Class 8 market share in 2020," Rush said.
Used Truck Glut
Rush sold 1,868 used vehicles in the third quarter of 2019, down 15% compared to the third quarter of 2018.
"Near record-high deliveries of new trucks over the past few years have caused an oversupply of used trucks in the market," Rush said."Currently, we believe that used truck values are depreciating faster than what is considered a normal rate."
The company's used truck inventory unit count is currently at its lowest point of 2019. Rush said it is valued appropriately with respect to current market conditions.
"We are closely monitoring used truck values, along with other market factors that affect used truck sales," he said.
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