Rush Enterprises Reports Mixed Q3 Results
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Rush Enterprises Inc., with more than 100 truck dealership locations in 22 states, reported net income eased a bit while revenue rose in the third quarter as it notched nearly 6% of all new Class 8 sales nationally.
Net income, for the period ended Sept. 30, was $39.1 million, or $1.05 per diluted share, on revenue of $1.59 billion. That compared with net income of $41.6 million, or $1.03, on revenue of $1.37 billion.
At the same time, the cost of products sold rose 18.7% to $1.33 million compared with $1.12 million a year earlier. The cost of products sold includes the general subcategories of direct labor, materials and overhead. The bulk of the increase came in new and used commercial vehicle sales, Rush reported without discussion.
“Robust activity in the commercial vehicle market and our continued focus on our aftermarket strategic initiatives positively contributed to our third-quarter results,” said W.M. “Rusty” Rush, chairman and CEO of Rush Enterprises Inc. “We outpaced the commercial vehicle market in both Class 8 and Class 4 through Class 7 sales, and our parts and services sales remained strong.”
Rush sold 4,318 Class 8 trucks in the quarter, an increase of 29.9% compared with a year earlier, and accounted for 5.5% of the new U.S. Class 8 truck market. New U.S. Class 8 retail sales totaled 78,117 units in the third quarter, up 12% over the same period last year, according to ACT Research.
The company sold 4,566 Class 4 through Class 7 medium-duty commercial vehicles in the quarter, an increase of 36% compared with a year earlier, accounting for 6.5% of the total U.S. market, again outpacing industry sales.
Medium-duty retail sales were 69,978 units in the third quarter of 2019, up 7.2% over the third quarter of 2018, according to ACT.
Meanwhile, San Antonio-based Rush reported aftermarket products and services accounted for about 64.4% of its total gross profits, with parts, service and collision center revenues reaching $454.8 million, up 6.5% compared with the third quarter of 2018.
The company achieved a quarterly absorption ratio of 120% in the quarter. Rush calculates absorption ratio by dividing the gross profit from the parts, service and body shop departments by the overhead expenses of all of a dealership’s departments, except for the selling expenses of the new and used commercial vehicle departments and carrying costs of new and used commercial vehicle inventory.
“Considering the continued decline in demand from the energy sector compared to last quarter and especially compared with the third quarter of 2018, we are pleased with our strong aftermarket performance this quarter,” Rush said.
He cited as contributing positive factors a broad portfolio of internal and customer-facing technology, a parts e-commerce platform, expedited commercial vehicle service and continuing to add skilled technicians to its network.
“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 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,” he added.
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