Rush Enterprises, Inc. (NASDAQ:RUSHA) Q1 2024 Earnings Call Transcript April 24, 2024
Rush Enterprises, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and thank you for standing by. Welcome to Rush Enterprises’ First Quarter 2024 Earnings Results Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Rusty Rush, Chairman, CEO and President. Please go ahead.
Rusty Rush: Good morning, and welcome to our first quarter 2024 earnings release 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.
Steven 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, 2023, and in our other filings with the Securities and Exchange Commission.
Rusty Rush: As indicated in our news release, we achieved first quarter revenues of $1.9 billion, and net income of $71.6 million, or $0.88 per delivery share. We are proud to declare a cash dividend of $0.17 per common share. Class 8 new truck production has caught up with market demand, and that along with other economic factors, led to a decline in our Class 8 new truck sales in the first quarter. The freight recession and elevated interest rates are negatively impacting over-the-road customers, both small carriers and large fleets. We are pleased to significantly outpaced the industry in Class 4 through 7 truck sales, and we achieved year-over-year growth in used truck sales, which were the bright spots in a challenging quarter.
In the aftermarket, our part service and body shop revenues were $649.2 million flat compared to the first quarter of 2023, and our absorption ratio was 130.1%. Our results were consistent with the industry, which is experiencing slowing aftermarket demand driven by a depressed freight market. We did, however, see some healthy aftermarket demand from the public sector, refuse, and medium-duty leasing customers. That along with our commitment to support large national fleet leads and diversifying our customer base, helped us to somewhat offset the challenging industry conditions we faced in the first quarter. As we look forward, we believe aftermarket demand in the second quarter will be fairly consistent with the first quarter, though we expect some seasonal uptick as we enter summer months.
We anticipate the current freight recession will continue to impact aftermarket demand, but we remain committed to executing on our strategic aftermarket initiatives. We believe that our second quarter aftermarket performance will align with our first quarter results. Turning to new truck sales, we sold 3,494 Class 8 trucks, accounting for 6% of the total U.S. Class 8 market, and 1.4% of the Canadian market. As expected, economic pressures, such as high interest rates and low freight volumes, along with production levels of new Class 8 trucks catching up with pent-up demand, led to a 13% decline in U.S. retail sales in the first quarter. While most of the decline in Class 8 truck sales was attributable to the over-the-road carriers, it is worth noting that we experienced healthy demand from vocational customers, and we expect this to be a good year for vocational truck sales.
ACT Research forecasts U.S. Class 8 retail sales to be 228,000 units in 2024, down 16% compared to 2023. Due to the timing of deliveries to certain of our large customers, and due to our diverse customer base, that includes strong support in vocational markets, we believe our second quarter truck sales will improve compared to the first quarter. However, we expect the current freight recession to continue, causing Class 8 truck sales to decrease in the second half of 2024, compared to the first half of 2020. That said, there is plenty of time for us to sell trucks into the second half of the year, and our sales teams are well-positioned to take advantage of every opportunity possible to help us navigate through these difficult market conditions.
Our Class 4 through 7 new truck sales reached 3,331 units in the first quarter, or 5.4% of the U.S. market, and 2.7% of the Canadian market. New and medium-duty truck supply is less constrained than it has been recently and lead times have decreased. Though deliveries continue to be somewhat delayed by issues with body manufacturers, with steady widespread demand from our customer base and our focus on supporting large national accounts, we are proud of our strong Class 4 through 7 results this quarter. ACT Research for US Class 4 through 7 retail sales to be 262,000 units in 2024, up 3.7% from 2023. As we look ahead, we will continue to monitor concerns regarding consumer spending and high interest rates and their potential impact on Class 4 through 7 demand.
Currently, we believe Class 4 through 7 commercial vehicle sales will improve in the second quarter compared to the first quarter and remain strong for the remainder of the year. Our used truck sales reached 1,818 units in the first quarter, up 8% compared to 2023. We continue to experience weak demand and depressed values for used trucks, largely due to low freight volumes and high interest rates. Even with those difficult conditions, great execution on our used truck inventory and sales strategy allow us to achieve strong results in the first quarter. As we look forward, the rate of decline in used truck values is slowing, but we believe it may continue to decline somewhat. But with our strategically diverse product mix, we expect our second quarter used truck sales to be similar to our first quarter results.
Looking ahead, we are closely monitoring economic issues and the current freight procession impacting over-the-road carriers, which we expect will continue for at least the next several months. We believe that the second half of the year will be tough with respect to new Class 8 truck sales, but we also believe that demand should remain solid for new Class 4 through 7 commercial vehicles. When it comes to the aftermarket, challenging operating conditions will likely continue, but we should experience some seasonal lift in the warmer months. To help offset the challenges facing our industry, we are taking action to reduce expenses throughout our organization. With these expense management measures, along with our diverse customer mix, and our focus on supporting large national fleets, we are confident that we can successfully navigate this difficult market cycle through the second quarter and the remainder of 2024.
It is very important that I express my gratitude to our employees for their hard work and for continuing to provide superior service to our customers while staying focused on our long-term goals. With that, I’ll take the questions.
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