Rush Earnings Mixed, but Beats Forecasts With Record New Truck Sales

Sign over a Rush Enterprises location
Rush Enterprises Inc.

Rush Enterprises reported lower fourth-quarter and full-year net income and higher revenue, but in the latest quarter beat analysts’ expectations as it sold a record number of new trucks.

For the quarter ended Dec. 31, Rush — the nation’s only publicly traded truck dealership with about 100 locations in 22 states — had net income of $46.9 million, or $1.20 per diluted share, on revenue of $1.54 billion. That compared with net income of $105.8 million, or $2.54, on revenue of $1.20 billion a year earlier.

The quarterly earnings per share represented “a strong beat relative to the street estimate of 90 cents, representing a 33% beat vs the street,” Credit Suisse analyst Jamie Cook wrote in an investor note.

Revenue was ahead of the consensus $1.35 billion, or “a 13.9% beat,” she wrote.

In 2017, pre-tax income was reduced by $7.2 million due to the company’s decision to pay a one-time discretionary bonus to all of its employees in December of that year. Also as a result of the tax reform legislation passed in December 2017, its tax expense for that year was reduced by $82.9 million in the fourth quarter. Excluding the one-time discretionary bonus and the one-time tax benefits, the company’s adjusted net income in the fourth quarter of 2017 was $27.6 million, or 66 cents.

Sales of new and used commercial vehicles in the quarter rose to $1.04 billion, up 37.7% compared with $762 million a year earlier.

New truck sales improved by 42% to $672.6 million compared with the fourth quarter of 2017, making it the strongest truck sales quarter in Rush’s history, according to the San Antonio-based company.

“In addition to our success in executing our strategic initiatives, the overall health of the economy, strong freight demand and continued activity in the markets we support also contributed to our success in 2018,” Chairman and CEO W.M. “Rusty” Rush said in a release.

Parts and service revenue in the quarter rose to $419.9 million from $378.7 million a year earlier.

“Our expanded all-makes parts product lines, additional parts and service locations and increased hours of service across our dealership network allow us to provide better support to customers and improve customer uptime when and where they need us,” Rush said.

Rush increased the number of technicians by 12.5%.

“We also have ambitious recruiting objectives for both service technicians and aftermarket sales representatives in 2019 and expect the number of employees in these positions will continue to grow,” he said.

Rush is a dealer for Paccar Inc. and Navistar International Corp. Paccar’s brands include Kenworth Truck Co. and Peterbilt Motors Co. Navistar is the parent of International Truck.

Rush also sells trucks by Mitsubishi Fuso Truck of America Inc., a unit of Daimler AG; Ford Motor Co.; Hino Trucks, a brand of the Toyota Group; and Isuzu Commercial Truck of America Inc.

For the full year, Rush posted net income of $139 million, or $3.45, on revenue of $5.55 billion. That compared with net income of $172 million, or $4.20, on revenue of $4.71 billion in 2017.

In 2018, Rush Class 8 retail sales accounted for 5.7% of the total U.S. Class 8 market, compared with 6.6% in 2017. The company sold 14,666 Class 8 trucks in 2018, an increase of 12.1% compared with 2017.

At the same time, the company’s Classes 4-7 medium-duty truck sales reached 12,949 units in 2018, an 18.2% increase compared with 2017. The sales accounted for 5% of the total U.S. Classes 4-7 market in 2018.

“With our focus on providing ready-to-roll medium-duty inventory nationwide, particularly to customers in the construction sector, our Classes 4-7 truck sales significantly outpaced the market in 2018, resulting in a record year for new Classes 4-7 truck sales,” Rush said.

In the earnings release, Rush noted it had invested in operations outside of the United States for the first time through an agreement Feb. 6 with Tallman Group, the largest International Truck dealer in Canada, to form Rush Truck Centres of Canada.

Rush will purchase 50% of the equity in that business. The transaction is expected to close Feb. 25.

Rush Enterprises does not intend to consolidate the joint venture as part of its truck segment for financial reporting purposes.