High interest rates and low freight rates slowed Class 8 aftermarket sales growth at Rush Enterprises in the third quarter. But the nation’s largest network of truck dealerships found plenty of compensation to support strong overall results.
Sales of Class 8 trucks rose 3% compared to a year ago, a period of severe restrictions as OEMs began to respond to reduced demand developed during the pandemic.
“Our off-road customers … are being negatively impacted by high interest rates and low fares,” said WM “Rusty” Rush, CEO, president and company president. “These conditions, along with rising fuel prices, which are particularly difficult for small carriers to navigate, [escalated] in the third quarter and slowed aftermarket growth across the industry.”
Rush sold 4,326 new Class 8 trucks, mostly Peterbilt and Navistar International models. This represented 6.1% of the US market and 2.1% of the new Canadian market.
The company sold 3,244 new medium-term Class 4 to 7 commercial vehicles in the third quarter, an increase of 0.7% compared to the third quarter of 2022. This represented 4.8% of the US new commercial vehicle market and 2, 3% of Canada.
“Operation within truck allocation limits”
Increased production is helping, but some body companies are lagging behind completing medium-duty truck facilities, Rush said.
“In the third quarter, we were still operating within the limits of the truck allocation. But new truck production has continued to improve, resulting in significantly shorter lead times for new truck purchases,” Rush said.
Strong demand in the waste, public sector, wholesale and energy sectors offset the flattening of Class 8 revenues after the off-highway market. Used truck pricing and demand will likely remain loose as values continue to decline at an accelerating rate. The rate of decline eased in the third quarter.
“We are well positioned to strategically manage our inventory and pricing to overcome these challenges,” Rush said. The company cut back on buying used trucks in February, preferring to wait for prices to recover.
Although it slowed, aftermarket products and services accounted for about 59% of the company’s gross profit in the third quarter. Parts, service and collision center revenue was $643.6 million, up 3.5% compared to the third quarter of 2022.
Overall, Rush reported gross revenue of $1.98 billion, a 6.2% increase from gross revenue of $1.86 billion in the prior quarter. Third-quarter net income was $80.3 million, or 96 cents per diluted share, compared with net income of $90.4 million, or $1.06 a year earlier.
Class 8 aftermarket pressure can get worse
The pressure on the Class 8 aftermarket may get worse before it gets better.
“Moving forward, we expect aftermarket revenues to continue to be negatively impacted by economic conditions affecting off-road customers, and we also believe the industry may experience some deflation with respect to the prices of certain commodity components,” he said. Rush. in a news.
The third quarter absorption rate was 132.8% compared to 136.2% a year ago. The absorption ratio reflects how much operating costs are covered by fixed functions such as servicing, aftermarket parts and collision repairs. Anything over a 100% absorption ratio becomes a profit.
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