Rush Enterprises, Inc. (NASDAQ:RUSHA), the leading commercial vehicle dealership network in North America, has reported its financial results for the first quarter of 2024. The company, headquartered in Texas, provides a comprehensive suite of services and solutions for commercial vehicle owners, including sales, leasing, parts, and maintenance.
In the first quarter of 2024, Rush Enterprises reported revenues of $1.87 billion, a 2.1% decrease compared to the same period in 2023. The company's net income for the quarter was $71.6 million, or $0.88 per diluted share. This represents a 21.0% decrease in net income compared to the first quarter of 2023, when the company reported net income of $90.5 million.
The company's operating cash flow for the first quarter of 2024 was $92.5 million, while its free cash flow was -$80.2 million. The decrease in net income and free cash flow was primarily due to the challenging freight environment, high interest rates, and the normalization of new truck production levels.
Business Overview
Rush Enterprises operates a network of over 125 commercial vehicle dealerships across 22 states in the United States and 14 locations in Ontario, Canada. The company's Truck Segment, which accounts for the majority of its business, provides sales, service, and financing solutions for a wide range of commercial vehicles, including heavy-duty trucks, medium-duty trucks, and light-duty vehicles.The company's Aftermarket Products and Services segment, which includes parts, service, and collision center operations, contributed $649.2 million in revenue during the first quarter of 2024, remaining relatively flat compared to the same period in 2023. This segment is a crucial part of Rush Enterprises' diversified business model, providing a more stable revenue stream and higher margins compared to the cyclical new vehicle sales.
Geographic Breakdown
Rush Enterprises' operations are primarily focused in the United States, with a growing presence in Canada through its acquisition of a majority stake in Rush Truck Centres of Canada Limited (RTC Canada) in 2022. In the first quarter of 2024, the company's U.S. operations accounted for approximately 94% of its total revenue, while the Canadian operations contributed the remaining 6%.Segment Performance
New and Used Commercial Vehicle Sales
In the first quarter of 2024, Rush Enterprises' new commercial vehicle sales, which include heavy-duty, medium-duty, and light-duty vehicles, decreased by 3.3% to $1.03 billion, compared to $1.05 billion in the same period of 2023. This decline was primarily driven by a 20.0% decrease in new Class 8 truck sales, which was partially offset by a 9.6% increase in new medium-duty truck sales.The company's used commercial vehicle sales reached $88.0 million in the first quarter of 2024, a 14.3% decrease compared to the same period in 2023. This decline was due to the continued weakness in the used truck market, which has been impacted by low freight volumes and high interest rates.
Aftermarket Products and Services
Rush Enterprises' Aftermarket Products and Services segment, which includes parts, service, and collision center operations, generated $649.2 million in revenue during the first quarter of 2024, remaining relatively flat compared to the same period in 2023. This segment's performance was impacted by the challenging freight environment, which has led to a slowdown in demand from the company's over-the-road customers.However, the company was able to offset some of the decline in demand from over-the-road customers by focusing on other market segments, such as the public sector, refuse, and medium-duty leasing customers. Additionally, Rush Enterprises' commitment to supporting large national fleets and diversifying its customer base has helped mitigate the impact of the freight recession.
Lease and Rental
The company's lease and rental revenue increased by 1.4% to $87.9 million in the first quarter of 2024, compared to $86.7 million in the same period of 2023. This increase was primarily due to the delivery of new leased vehicles, as manufacturers were able to increase production, which was partially offset by a slight decrease in rental utilization.Financial Services
Rush Enterprises' finance and insurance revenue decreased by 17.9% to $5.4 million in the first quarter of 2024, compared to $6.6 million in the same period of 2023. This decline was primarily due to the mix of purchasers of commercial vehicles, with a larger proportion of sales going to larger fleets, which typically arrange their own financing.Guidance and Outlook
Looking ahead, Rush Enterprises expects the current freight recession to continue impacting its over-the-road customers, both small carriers and larger fleets, throughout 2024. The company anticipates that new Class 8 truck sales will decrease in the second half of the year compared to the first half, as production levels have caught up with the pent-up demand experienced in recent years.However, the company remains optimistic about its medium-duty truck sales, which it expects to improve in the second quarter and remain strong for the remainder of the year. Additionally, Rush Enterprises believes it can achieve some growth in its Aftermarket Products and Services segment in the second half of 2024, driven by its diversified customer base and focus on supporting large national fleets.
To help offset the challenges facing the industry, the company is implementing cost-cutting measures, which it expects to have a more significant impact in the third and fourth quarters of 2024. These initiatives, combined with the company's diversified business model and strategic focus, position Rush Enterprises to navigate the current market conditions and capitalize on opportunities as the freight environment and new vehicle demand improve.
Financial Ratios and Liquidity
As of March 31, 2024, Rush Enterprises had a current ratio of 1.43 and a quick ratio of 0.28, indicating a strong liquidity position. The company's debt-to-equity ratio was 0.94, suggesting a moderate level of leverage.In terms of profitability, the company's gross profit margin was 20.8% in the first quarter of 2024, compared to 20.9% in the same period of 2023. The company's operating profit margin was 5.9% in the first quarter of 2024, down from 6.7% in the same period of 2023.
Rush Enterprises' return on assets (ROA) and return on equity (ROE) were 7.0% and 17.0%, respectively, in the first quarter of 2024, reflecting the company's efficient use of its assets and capital.