Rush Enterprises Inc. announced that for the quarter ended March 31, 2022, the company achieved revenues of $1.563 billion and net income of $92.5 million, or $1.60 per diluted share, compared with revenues of $1.232 billion and net income of $45.3 million, or $0.79 per diluted share, in the quarter ended March 31, 2021.
On Jan. 3, 2022, Cummins Inc. and the company closed on Cummins’ acquisition of a 50 percent equity interest in Momentum Fuel Technologies that resulted in a $12.5 million gain. Excluding the one-time gain related to the joint venture transaction, the company’s adjusted net income for the quarter ended March 31, 2022 was $82.9 million, or $1.43 per diluted share. Additionally, the company’s Board of Directors declared a cash dividend of $0.19 per share of Class A and Class B Common Stock, to be paid on June 10, 2022, to all shareholders of record as of May 12, 2022.
“We are extremely proud of our strong financial results, including overall revenues and net profit, which were both first quarter records for our company,” says W.M. “Rusty” Rush, chairman, CEO and president of Rush Enterprises, Inc. “Our results were primarily driven by the continued strong economy and healthy consumer spending for much of the quarter. While new truck production capacity remained limited due to component part supply chain issues, our Class 8 new truck sales significantly outperformed the market.
“Our aftermarket revenues also greatly contributed to our financial results and were primarily driven by increased demand for parts and service support and our continued focus on our long-term aftermarket initiatives. Further, the acquisition of 19 dealership locations from The Summit Truck Group in the fourth quarter of 2021, and the gain on the sale in connection with the establishment of our joint venture with Cummins positively impacted our financial performance in the first quarter,” says Rush.
“Currently, the economy remains healthy and there continues to be pent up demand for new commercial vehicles and aftermarket services caused by supply constraints over the last year. These factors should positively impact commercial vehicle and aftermarket sales throughout the remainder of 2022. Conversely, we are beginning to see elevated fuel prices negatively impact spot market rates and believe inflation and rising interest rates may begin to negatively impact consumer spending and capital expenditures across a variety of industries we support. We are carefully monitoring these and other economic factors that may impact industry demand moving forward. However, with the ongoing integration of our strategic initiatives into our newly acquired dealership locations, and our continued disciplined approach to expense management, we believe our financial results will continue to be strong in 2022,” Rush says.
“It is important for me to recognize our employees for their unwavering commitment to our company and our long-term goals. A quarter like this simply would not have been possible without their outstanding contributions,” Rush said.
Aftermarket products and services
Aftermarket products and services accounted for approximately 61 percent of the company’s total gross profit in the first quarter of 2022, with parts, service and collision center revenues reaching $543.3 million, up 30.7 percent compared to the first quarter of 2021. The company achieved a quarterly absorption ratio of 136.3 percent in the first quarter of 2022, compared to 122.6 percent in the first quarter of 2021.
“In the first quarter, there was strong demand for maintenance and repair of existing vehicles in operation. This demand, combined with our growing technician work force, resulted in healthy parts and service activity from most market segments we support, particularly refuse, large national fleets and some energy customers,” says Rush. “During the first quarter, we continued to expand and train our technician workforce, and we furthered our strategic initiatives by expanding our Xpress services, mobile service and contract maintenance offerings, all of which helped our aftermarket revenues grow. While parts supply constraints continue to impact the industry and limit our aftermarket growth somewhat, the scale of our nationwide parts inventory better equips us to manage parts shortages,” says Rush.
“As we look ahead, we expect parts supply constraints to continue to impact the industry through at least the remainder of the year, but we also believe parts and service demand will remain strong throughout 2022. Additionally, we continue to expand our dedicated aftermarket sales team to support large national fleets as well as increase the size of our technician workforce. By leveraging the geographic and product breadth of our network and implementing our processes and strategic initiatives at our new locations, we believe our aftermarket results will substantially outpace the industry this year,” says Rush.
Commercial vehicle sales
New U.S. Class 8 retail truck sales totaled 51,347 units in the first quarter of 2022, down 7.3 percent over the same time period last year, according to ACT Research. However, the company significantly outpaced the industry, selling 3,528 new Class 8 trucks in the first quarter, an increase of 17.8 percent compared to the first quarter of 2021, and accounting for a 6.9 percent share of the new U.S. Class 8 truck market. “While U.S. new Class 8 truck sales declined somewhat in the first quarter due to ongoing component parts supply chain issues, we experienced strong, broad-based demand from a wide variety of market segments, including over-the-road, construction and vocational customers. We are very pleased with our new Class 8 truck sales results in the first quarter despite continued production challenges that have limited the number of Class 8 trucks we have available to sell,” says Rush.
“Looking ahead, we believe production constraints caused by global supply chain issues will continue to negatively impact the new Class 8 truck market through the year,” says Rush. “Truck allocation by the manufacturers we represent will continue to limit our ability to meet the full demands of the market, but our backlogs remain strong, and we believe our results will outpace the industry in 2022.”
New U.S. Class 4 through 7 retail commercial vehicle sales totaled 57,243 units in the first quarter of 2022, down 7.8 percent over the same time period last year, according to ACT Research. The company sold 2,141 Class 4-7 medium-duty commercial vehicles in the first quarter, a decrease of 8.3 percent compared to the first quarter of 2021, which accounted for 3.7 percent of the U.S. Class 4 through 7 commercial vehicle market.
“In the first quarter, most of the medium-duty truck manufacturers we represent were still significantly limiting production, with some manufacturers increasing production of more profitable heavy-duty trucks instead of medium-duty trucks,” says Rush. “That said, we experienced strong, widespread demand from most market segments, especially vocational and municipalities. Looking ahead, we expect medium-duty truck production will remain constrained until at least later this year, and we believe our medium-duty truck sales results will be consistent with the industry in 2022.”
The company sold 2,395 used commercial vehicles in the first quarter of 2022, a 24.5 percent increase compared to the first quarter of 2021.
“Strong demand for used trucks continued in the first quarter, with broad-based activity from most market segments we support. However, used truck values are beginning to retract from their historically high levels in 2021, and we believe used truck values will continue to moderate throughout the remainder of 2022. We believe softening spot rates will be offset by new truck production constraints resulting in healthy used truck demand for the remainder of 2022,” said Rush.
Network Expansion
In the first quarter, the company expanded its network with Rush Truck Centers – Miami Northwest, which offers parts and used truck sales. “This new location strengthens our presence in a major trucking market and enables us to enhance the support we provide to customers in Florida,” says Rush. Next week, the company expects to close on a deal to acquire an additional 30 percent of Rush Truck Centres of Canada Limited, the largest international truck dealer in Canada, bringing the company’s total ownership of Rush Truck Centres of Canada Limited to 80 percent.
“We have been integrating Rush Truck Centres of Canada’s 15 dealership locations to our network since 2019, and we are pleased to expand our investment, to further support cross-border transportation customers,” says Rush.
Financial Highlights
In the first quarter of 2022, the company’s gross revenues totaled $1.563 billion, a 26.9 percent increase from $1.232 billion in the first quarter of 2021. Net income for the quarter was $92.5 million, or $1.60 per diluted share, compared to net income of $45.3 million, or $0.79 per diluted share, in the quarter ended March 31, 2021. On Jan. 3, 2022, Cummins Inc. and the company closed on Cummins’ acquisition of a 50 percent equity interest in Momentum Fuel Technologies that resulted in a $12.5 million gain. Excluding the one-time gain related to the joint venture transaction, the company’s adjusted net income for the quarter ended March 31, 2022 was $82.9 million, or $1.43 per diluted share.
Aftermarket products and services revenues were $543.3 million in the first quarter of 2022, compared to $415.7 million in the first quarter of 2021. The company delivered 3,528 new heavy-duty trucks, 2,141 new medium-duty commercial vehicles, 481 new light-duty commercial vehicles and 2,395 used commercial vehicles during the first quarter of 2022, compared to 2,995 new heavy-duty trucks, 2,334 new medium-duty commercial vehicles, 395 new light-duty commercial vehicles and 1,924 used commercial vehicles during the first quarter of 2021.
Rush Truck Leasing operates 52 PacLease and Idealease franchises across the country with more than 8,800 trucks in its lease and rental fleet and more than 1,600 trucks under contract maintenance agreements. Lease and rental revenue increased 22.5 percent in the first quarter of 2022 compared to the first quarter of 2021. This increase was primarily related to the acquisition of the Summit Idealease locations in the fourth quarter of 2021.
During the first quarter of 2022, the company repurchased $15.3 million of its common stock pursuant to its stock repurchase plan. In addition, the company paid a cash dividend of $11.1 million during the first quarter.
“Throughout the first quarter, we remained focused on our long-term strategic initiatives and diligent expense management, resulting in record-high first quarter revenues and profitability,” says Rush. “Further, we are proud to continue to return value to shareholders while keeping a strong balance sheet and cash position.”
More earnings information can be found here.
