Rush Enterprises, Inc. (NASDAQ:RUSHA) Q3 2023 Earnings Call Transcript October 25, 2023
Operator: Good day, and thank you for standing by. Welcome to the Rush Enterprises, Incorporated. Third Quarter 2023 Earnings Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Rusty Rush, Chairman, President and Chief Executive Officer. Please go ahead, sir.
Rusty Rush: Good morning, and welcome to our third quarter 2023 earnings release conference call. On the call are Mike McRoberts, Chief Operating Officer; Steve Keller, Chief Financial Officer; Jay Hazelwood, Vice President and Controller; and Michael Goldstone, Senior Vice President, General Counsel and Corporate Secretary. Now Steve will say a few words regarding forward-looking statements.
Steve Keller: Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in our annual report on Form 10-K for the year ended December 31, 2022 and in our other filings with the Securities and Exchange Commission.
Rusty Rush: As indicated in our news release, we achieved third quarter revenues of $2 billion and net income of $80.3 million or $0.96 per diluted share. We are proud to declare a cash dividend of $0.17 per common share. In the third quarter, we achieved strong financial results due to revenue growth from our expanded service technician workforce, our support of large national accounts and ongoing pent-up demand for new Class 8 and Class 4-7 trucks, following a limited new truck production in the past few years. Though our largest customer segment, the over-the-road customers, are being negatively affected by high interest rates, low freight rates and other economic factors, ongoing focus on our strategic initiatives helped us partially offset these challenges and achieved strong financial results in the third quarter.
In the aftermarket, our parts, service and body shop revenues were $643.6 million, up 3.5% for our absorption rate was 132.8. Through our aftermarket revenue has slowed – growth has slowed compared to previous quarters. The diversity of our customer base, our technician workforce and focus on large national accounts fueled our strong aftermarket results this quarter. Looking ahead, we believe aftermarket growth will continue to moderate through the rest of this year, and we are closely monitoring consumer spending and other economic conditions, which could impact parts and service demand. In the fourth quarter, we believe customer demand for aftermarket services will remain steady and that our aftermarket results will be similar to the third quarter, with slight adjustments caused by normal seasonal softness and fewer working days in the quarter.
Turning to truck sales. We sold 4,326 new Class 8 trucks in the quarter, guiding for 6.1% of the US market and 2.1% in the Canadian market. Low freight rates continue to affect smaller operators, but strong pent-up demand continues due to limited to truck production over the past few years. While there’s still new truck supply issues causing us to still be on allocation from our OEMs, new truck production continued to improve in the third quarter, resulting in significantly shorter lead times for new tucks. ACT Research forecast US truck sales, Class A truck sales to be 278,000 in 2023, up 7.2% compared to 20.2%. We believe pent-up demand for Class 8 trucks will last through the fourth quarter and then our fourth quarter Class 8 truck performance will align with our third quarter results.
Our Class 4-7 new truck sales reached 3,244 units in the third quarter, accounting for 4.8% of the US market and 2.3% of the Canadian market. We experienced solid demand from a variety of market segments. And those truck manufacturers are loading more resources to medium-duty trucks. Production remains limited and unmet demand in the market remains. ACT Research forecast Class – US Class 4-7 for retail sales to be 253,000 units in 2023, up 8.5% from 2022. We are closely watching consumer spending and other economic factors, which could impact our new Class 4-7 units, but continued pent-up demand with significantly signed, we expect our fourth quarter results will align with our third quarter results. Our used truck sales reached 1,797 units in the third quarter, up 1.9% year-over-year.
New truck production, soft freight rates, tight credit conditions led to continued weak demand in our industry in the third quarter, used truck values to continue to decline at an accelerated rate, though the rate of decline is slow and values appear to be normalizing. With new truck production continuing to increase with freight rates not expected to improve significantly in the fourth quarter. We expect used truck demand will remain low to the end of this year. We plan to maintain our inventory at lower than normal levels and believe we are well positioned to navigate these challenging market conditions. We expect that our fourth quarter used truck results will be consistent again with our third quarter. As we look ahead, we believe pent-up demand for Class 8 trucks will substantially be satisfied by the end of the fourth quarter, and that new truck production has continued to improve.
We will continue to monitor economic factors, which are impacting our customers, especially over-the-road carriers. While we expect typical seasonal softness in the fourth quarter, we believe our financial results will align with the third quarter results and we will close the year strong. As always, it is important for me to thank our employees for their great work every day and for staying focused on our company’s long-term strategic initiatives, while providing superior service to our customers. With that, I’ll take your questions.
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