July 24, 2018 6:15 PM, EDT

Rush Declares First Dividend as 2Q Revenue, Profits Climb

A Rush truck centerA Rush truck center by Rush Enterprises Inc.

Multistate truck dealership Rush Enterprises Inc. saw revenue increase and net income spike 33% in the second quarter and announced its first-ever quarterly dividend.

For the period ended June 30, net income hit $29.4 million, or 72 cents per diluted share, compared with $22 million, or 54 cents, a year earlier.

The company beat the street handily, based on adjusted earnings per share of 92 cents after removing charges for amortization expenses and selling, general and administrative expenses totaling 20 cents, according to analyst Michael Baudendistel with Stifel, Nicolaus & Co.

“Our estimate had been 81 cents and the average of the six sell-side estimates had been 73 cents,” Baudendistel wrote in a note to investors.

Revenue reached $1.3 billion compared with $1.2 billion in the 2017 period.

Aftermarket services accounted for 64.8% of the company’s total gross profits, with parts, service and body shop revenues reaching $422.9 million, up 15.4%, compared to the second quarter of 2017. Rush achieved a quarterly absorption ratio of 122.8% in the second quarter of 2018.

Pointing to data from ACT Research Co., the company noted that U.S. Class 8 retail sales were 60,812 units in the second quarter, up 24.7% over the same period last year. Rush sold 3,218 Class 8 trucks in the second quarter and accounted for 5.3% of the U.S. Class 8 truck market, but the company faced some headwinds. “Our new Class 8 truck deliveries were down slightly in the second quarter, primarily due to truck and component manufacturer production constraints. However, our new Class 8 truck deliveries are up 7.8% year to date as compared to the same time frame last year,” W.M. “Rusty” Rush, chairman and CEO of Rush, said in a statement.

Though manufacturer constraints could push some Class 8 deliveries into early 2019, the company believes the pace of new Class 8 truck sales will increase in the second half of 2018 — mostly as sleeper units for over-the-road operations, Rush said in a conference call with analysts July 25.

The company has added 300 technicians over the past year, expanding its service capabilities throughout the country, he said. “Mobile technicians make up a significant portion of this growth, illustrating our abilities to serve customers no matter where and when they need us.”

He added: “We grade technicians level 1 to level 5, 5 being the best. They don’t show up as 5s [so] you’ve got to train those people.”

The company declared an initial quarterly cash dividend of 12 cents per share on Class A and Class B common stock, to be paid on Aug. 29, to all shareholders of record as of Aug. 8. The company expects to increase the dividend on an annual basis over time, subject to board approval and market conditions.

The current dividend yield is 1.1%, Baudendistel wrote. “We suspect that the increase in the company’s absorption ratio over the years (which in theory represents steady revenue that is nowhere near as cyclical as new or used truck sales) contributed to giving management and the board confidence that the implementation of a dividend is appropriate,” he said.

Rush operates a network of commercial vehicle dealerships in the United States, with more than 100 locations in 21 states, representing International Trucks or Peterbilt Motors Co., plus other medium-duty brands.