Prepared remarks
Good day, and thank you for standing by. Welcome to Rush Enterprises, Inc. second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Rusty Rush, President, CEO and Chairman of the Board. Please go ahead.
Well, good morning. Welcome to our second quarter 2026 earnings release call. With me on the call this morning are Steve Keller, Chief Financial Officer, Jody Pollard, Chief Operating Officer, Jay Hazelwood, Vice President and Controller, Michael Goldstone, Senior Vice President, General Counsel, and Corporate Secretary. Before I get started, Steve will say a few words regarding forward-looking statements.
Certain statements we will make today are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because these statements include risks and uncertainties, our actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to, those discussed in our annual report on Form 10-K for the year ended December 31, 2025 and in our other filings with the Securities and Exchange Commission.
Thank you, Steve, and thanks everyone for joining us today. As we reported yesterday, we generated revenues of $1.9 billion during the second quarter, with net income of $72.8 million or $0.91 per diluted share. In addition, our board declared a three-for-two stock split for both our Class A and Class B common stock, as well as a post-stock-split quarterly cash dividend of $0.14 per share representing a 10.5% increase compared to our prior quarter. Returning capital to our shareholders remains an important part of our long-term capital allocation strategy, and we are pleased to continue increasing our dividend while maintaining a strong balance sheet. As I mentioned on our Q1 call, we believe the first quarter represented the trough of the down cycle that the industry has been dealing with for the last few years. During the second quarter, we saw encouraging signs that market conditions are continuing to improve. While the recovery remains in early stages, improving freight rates and customer confidence, increased quoting activity, and significantly stronger new truck order intake all contributed to better business conditions as the quarter progressed. We feel good about the second half of the year. Given where the industry has been over the last several years, I am proud of how our team performed during the quarter. Our diversified business model once again demonstrated its resilience, and our team's ability to execute allowed us to capitalize on improving market conditions and generate solid financial results. We also continue making progress on our strategic growth initiatives. During the quarter, we completed the acquisition of five Peterbilt dealerships in Louisiana, expanding our Rush Truck Centers network through the Gulf Coast region. We also expanded our Canadian operations through the acquisitions of five commercial dealerships in southwestern Ontario, further strengthening our presence in one of Canada's largest transportation markets. And last week, we announced we signed an agreement to form a 50% owned joint venture with MCT Companies, one of the nation's largest Carrier Transicold dealer groups. Subject to customary closing conditions, we expect the transaction to close during the third quarter. Through our investment in this joint venture, we are looking to establish our presence in the refrigerated transportation market, an adjacent business that complements our core dealership operations and will allow us to expand the solutions we offer our customers while creating long-term value for our shareholders. This transaction demonstrates one of our ways of achieving long-term growth, and we will continue to evaluate other opportunities to acquire or invest in businesses that are adjacent to the commercial vehicle industry. Our aftermarket operations improved during the second quarter, accounting for approximately 64% of our total gross profit. Our parts, service, and collision center revenues totaled $605 million, an increase of 1.5% compared to the second quarter of last year, and our absorption rate remains strong at 130.8%. Demand for our aftermarket parts and services improved gradually across much of our business as the quarter progressed, particularly among over-the-road fleet customers. As freight markets have continued to improve and fleets are driving more miles, we are beginning to see repair activity return after an extended period of customers deferring spend on vehicle maintenance. While the aftermarket recovery is still trailing the improvement we are seeing in commercial vehicle quoting activity and new truck orders, we are encouraged by the momentum we built in the quarter. Looking ahead, we expect our aftermarket business to continue improving as fleet utilization increases and new truck deliveries ramp up. Historically, new truck deliveries create additional opportunities for parts and services as customers upfit those vehicles and prepare trade-ins for resale. We remain focused on improving operational efficiency, growing our managed and national accounts, and continuing to deliver exceptional service to our customers. Turning to truck sales: new Class 8 retail sales remain below normal replacement levels during the second quarter, but despite that environment, we sold 3,170 Class 8 trucks in the United States—essentially flat with the second quarter of last year. While the overall market declined, that performance increased our U.S. Class 8 market share to 5.8%, reflecting the strength of our customer relationships, our diversified customer base, and our disciplined inventory management. Most importantly, customer quoting activity and order intake improved significantly throughout the quarter, reinforcing our belief that the recovery we anticipated earlier this year is beginning to take shape. Looking ahead, we believe the second half of 2026 will be considerably stronger than the first half with respect to Class 8 truck sales. Improving freight markets, strong fleet profitability, and increasing customer confidence are all supporting higher quoting activity. We are also seeing customers planning equipment purchases ahead of the 2027 emissions regulations, which are expected to be finalized soon. With respect to medium-duty commercial vehicle sales, we sold 3,170 new Class 4 through 7 commercial vehicles in the United States during the quarter, down 12.7% compared to the second quarter of 2025. Similar to our medium-duty results in the first quarter, our year-over-year comparison was impacted by the timing of orders and deliveries to several of our larger fleet customers, as our larger medium-duty customers delayed purchasing decisions into the first half of 2026. Like our heavy-duty truck sales, our medium-duty commercial sales improved steadily as the quarter wore on, particularly in June. ACT Research expects the broader market to remain challenging during 2026. We believe our growing backlog, anticipated deliveries, and available inventory position us to meet anticipated customer demand. We believe that our medium-duty sales will continue to improve as the year progresses and will be roughly in line with our sales during 2025. Used commercial vehicle demand also continued to improve during the quarter, with June being our strongest month of the year so far. Healthier freight market conditions continue to support customer demand, particularly among buyers looking for a cost-effective alternative to new equipment. While financing remains challenging for some, we believe higher new truck prices combined with the approaching 2027 federal emissions regulations will continue to make quality used trucks an attractive option. We expect used truck demand to remain healthy throughout the remainder of the year, and we believe our disciplined approach to inventory management and pricing positions us well as the market conditions continue to normalize. Rush Truck Leasing delivered another solid quarter, generating revenues of $94.8 million, an increase of 1.9% compared to the second quarter of last year. Our leasing and rental business continues to be one of the most consistent contributors to our financial performance. Its stable revenue model helps offset some of the cyclicality we experience in new commercial vehicle sales while continuing to generate healthy returns. Looking ahead, we continue to see healthy demand for leasing and rental services as fleets replace aging equipment. As new truck demand improves, manufacturers may eventually reach production capacity constraints, and our leasing and rental activity has historically benefited from reduced manufacturing capacity. Combined with improving rental utilization and continued growth in our contract maintenance business, we believe our leasing and rental operations are well-positioned to continue delivering steady growth in the years ahead. To sum it up, I believe our second quarter results demonstrate both the resilience of our diversified business model and our team's ability to execute during a period when commercial vehicle conditions are beginning to improve. While the industry recovery still has a ways to go, we are encouraged by stronger order activity, improving customer sentiment, and healthier freight market fundamentals—all of which support our expectation for a stronger second half of the year. We also remain committed to investing in our future through ongoing strategic initiatives, organic growth opportunities, and acquisitions of commercial vehicle dealerships or investments in businesses adjacent to the commercial vehicle industry, while continuing to return capital to our shareholders through dividends and share repurchases. We believe these initiatives, together with our strong balance sheet and disciplined operating approach, position Rush Enterprises and our shareholders for long-term success. Finally, I want to thank all of our employees for their dedication, professionalism, and commitment to serving our customers. I believe they are the best in the business, and their hard work continues to distinguish Rush Enterprises as an industry leader. With that, I will take your questions.
Questions and answers
Okay. Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brady Lierz of Stephens. Your line is now open.
Hey, thanks. Morning, Rusty. Thanks for taking our questions. I wanted to maybe unsurprisingly start on Class 8 sales if we could. Since we talked last May, we did get some clarity from the EPA around the 2027 emissions. And then, just yesterday, a large public truckload carrier mentioned doing a strategic pre-buy. Can you just talk about what you are hearing from your customers on both the pre-buy front and what you expect Class 8 sales growth to look like in the back half of the year?
From the back half of the year, as I mentioned in the release, we expect to ramp up fairly well. Our backlog is as big as it has been in a couple of years. Where we sit right now, we are basically sold out. That does not mean we do not still have a few trucks to sell, because we stock a rather large inventory, but from a large customer perspective, we are basically sold out across the Class 8 side. We are still squeezing a few in here or there, but it is very difficult given the current build rates. The most exciting thing to me with the EPA announcement is that, understanding we still have a commentary period, they did announce NCPs, or nonconformance penalties, which will, for some manufacturers, be utilized. I know PACCAR is going to, and I know Cummins is going to do a phase-in of their new technology while continuing to produce older engines at least through September of next year. I think that gives a nice platform to ease into the new regulations. This excites me about this year, and what next year will look like, because we are not having a cliff event where everyone immediately moves to new technology. We will ease into it for the manufacturers that choose to. Those two OEMs I mentioned have announced plans; others have not. If I am a customer, and my business is showing the dramatic increases that we see in many releases and indicators—perhaps not fully reflected in Q2—this allows me to further test new technologies while still buying at a known nonconformance penalty that is not too burdensome given overall vehicle costs. That allows customers to ease into the new technologies. With business getting better, there may be upside to 2027 given what the EPA has outlined, as some of the transition effectively moves into early 2028 for certain OEMs. Right now, we are getting where we can truly quote into 2027. We are in a transitionary phase, but I feel solid about the back half of this year, certainly ramping in Q3 and into Q4. Remember, we operate on the retail side. With our backlog, we should be covered into Q1. I would tell you we have three quarters of solid backlog currently, and we will see how customers view the market as their businesses continue to improve. Right now, most big fleets believe business will continue to improve; in some cases, they are seeing double-digit rate increases. Because of stabilization of older technology that will still be available and the ability to avoid emerging new-technology questions by paying a modest premium, I feel good about at least the first half of 2027 and probably through the year, based on customer performance. The over-the-road business is still the largest sector in Class 8, and all these factors bode well as we move forward for the foreseeable future.
That is very helpful. Thank you. Since we last talked in May, also, we have seen a pretty meaningful increase in truckload spot rates. We saw a nice sequential step in your parts and service revenue this quarter. How are you thinking about parts and service revenue growth second half of the year? And just are you seeing any headwind to parts and service revenue due to the fact that this improvement in the freight market is supply-driven and not demand-driven?
I think we have seen some headwinds. The parts and service business has been slower to recover than order intake on the Class 8 side. It has been a very competitive environment as customers continued to manage their spend. Now that we are seeing stabilization and business performing better from a customer perspective, we expect that spend to get more in line with normal activity, but it has been tough for a while on the parts and service side. We have been pretty flat with some margin compression driven by competitiveness. As the quarter progressed, we saw pickup, which bodes well. Through July so far, we have seen continued, gradual improvement—not double-digit ramps, but steady improvement—and we feel good that it will be a solid improvement throughout the rest of the year. A couple of important dynamics: our small customer base, the unassigned accounts, has been crushed the last three years, down double digits each year. We finally saw a trough there and a small rebound—small single-digit increases. That customer segment represents roughly 30% to 32% of our service business, so seeing those customers return is helpful. While national accounts have grown, pricing has been competitive. The return of small customers will help the overall mix. Also, increased new truck activity generates upfitting and trade-in preparation work that drives parts and service demand. So there are multiple reasons I feel good about continued improvement across the remainder of the year. It will be steady, not a one-month dramatic jump, but solid sequential gains driven by better freight markets and increased miles driven.
That is all very helpful, Rusty. Thanks so much for the time, and I'll leave it there. Pass along.
You got it.
Thank you. Our next question comes from the line of Cole Couzens. Your line is now open.
Hey, guys. Thanks for taking my question. From a built-in demand perspective, it sounds like the new EPA proposal could be good for the Class 8 industry this year and next year. But let's say an OEM wants to sell a current model truck with an NCP next year, how does that impact your pricing and margins in that scenario, if at all?
An NCP will be a known number, so it will be hard to significantly mark up a known government-driven number. There will be a pass-through, and there will be federal excise tax on it. Right now, a Class 8 engine NCP is being interpreted by most people in the $6,000 to $8,000 range, plus FET, which adds the 12% federal excise tax. There is still a commentary period, so these numbers are subject to change, and OEMs will have differing views and approaches. Personally, I think it is fairly reasonable; it allows for a transition. My view is this will be more of a one-year type scenario and then ramp more in early 2028 when most OEMs will have moved to new technology, so it will likely not be a cliff event. From a customer perspective, this is helpful. It allows fleets to replenish with older, proven technology without jumping immediately into new platforms that may have unknowns. I expect customers to buy some new technology and to buy some proven technology where OEMs offer both platforms—Cummins has mentioned that approach. I do not consider 2026 a pre-buy year. We delivered about 95,000 U.S. Class 8s in the first half, while a 10-year average is around 232,000, so there is a large gap. I could see 2027 being stronger—in fact, ACT Research already has 2027 higher than 2026—because of the slow start to 2026. But for now, I think the NCPs will make 2027 a better year without a big blip as we roll into new technology, and retail demand will largely be driven by production constraints and fleet health.
That all makes sense, and it is super helpful, Rusty. Maybe also, can you speak to what trends you are seeing so far in July—whether it is across commercial vehicle sales or aftermarket—and expand a bit more on the trends you are seeing with small unassigned accounts versus some of your larger national accounts first? Thank you.
Truck deliveries will continue to increase. We are receiving trucks more than earlier in the year, but deliveries often lag receipt by 30 to 120 days depending on application. I expect July, September, and beyond to continue to ramp. This won't be a doubling but steady increases. For parts and service, I expect continued improvement for reasons I described earlier, including the rebound of small customers. We saw a 4% sequential increase Q1 to Q2, which is modest but encouraging and suggests we may be bottoming in some areas. Our vocational businesses—construction, refuse, medium-duty—also contribute to parts and service activity. While over-the-road is the largest market, our geographic and market diversification helps us manage cyclicality. We have some legs on this recovery; I feel there is positive momentum. We are basically sold out for the year, which we have not been in a while. There are still variables—tariffs and EPA changes, for example—but overall, I see solid sequential improvement. We managed G&A well in the quarter, and I expect continued improvements as market fundamentals strengthen.
Yeah. And last one, any signs on the small assigned versus the national accounts?
Small carriers that survived the recession will likely continue to operate and eventually return to normalized maintenance and repair spending. From a parts and service perspective, that is positive because small customers represent a meaningful share of our repair business. Used truck demand is supported by lack of new availability and higher new truck prices. For parts and service, we saw sequential improvement and I think the small carrier will continue to return to more normalized spend levels as freight markets and their businesses improve. Overall, I expect solid sequential improvement—not dramatic, but sustainable—potentially with 24 months of legs on this rate recovery if tonnage and miles continue to expand.
Thank you. Our next question comes from the line of Avi Jaroslawicz of UBS. Your line is now open.
Thank you. Good morning, guys. I know you have already spent a lot of time talking about it, but just sticking on the dynamics of pre-buying this year versus next year, would you say that you do not really think you have seen or you are seeing pre-buy demand this year, or is it really more about how much the OEMs can produce? Because I mean, thinking about $6,000 to $7,000 NCPs before the FET, it is not nothing for next year. Would there still be some incentive to pre-buy this year?
Production is the problem. We are fairly sold out; there is a little left but not a lot. OEMs may try to increase builds, but ramping capacity is not simple; second- and third-tier suppliers often constrain increases. While $6,000 to $7,000 is meaningful, improving business conditions and the availability of proven technology without unknowns makes customers comfortable rolling into 2027 with NCPs. I would characterize 2026 as not a pre-buy year. You could see 2027 stronger, and if there is a larger technology cliff into 2028, that might drive pre-buy behavior then. For us on the retail side, our backlog carries us into Q1, and production constraints dictate deliveries. Talk to OEMs about exact production capacity, but broadly production, not demand, is the current limiting factor.
One of the things you mentioned was potential to see some pre-buying next year ahead of the engine changeover in 2028. How are you thinking about those dynamics? If $6,000 to $7,000 increase for next year is manageable broadly speaking, the incremental cost increase in 2028 could be larger. Why would you expect a pre-buy potentially next year?
Because customers prefer proven technology. I have seen technology changes before and they typically cause a blip. Look back to 2010 with DEF and clogged particulate filters; uptime issues filled shops. New technology introductions are rarely perfectly smooth. This transition is different because not everyone is using the same technology—different after-treatment approaches from different OEMs—so customers may prefer to buy proven platforms. There will still be some price increase for new technology, maybe $4,000 to $5,000 or more by 2028, but many variables remain, including tariffs and OEM pricing decisions. Neither of the two OEMs I represent has fully priced the new technology for 2028 yet, so we will have to wait and see. Customers tend to adopt proven solutions slowly, and that is why I could see pre-buy activity depending on how technology rollouts and pricing evolve.
I just want to switch topics from talking about the cycle to some of what you guys are doing. Would love to hear more thoughts about the MCT deal and the entry into the refrigerated trailer market. How are you thinking about that as a strategic move and the long-term vision? Is this a launching-off point, or is this more of a one-off deal?
This is not a one-off deal. We are committed to the space. We studied refrigerated transportation for well over a year and believe we found the right partner as a launching point. It is a sizable opportunity inside a market that, while smaller than the truck business, has a very similar model—refrigeration units and service. I have visited their shops with the partner and believe it is a solid organization and manufacturer we can grow with. We have not closed the JV yet, but it will pursue growth and is not a one-off. We bring a strong balance sheet and a broad dealer footprint to partner with MCT, and over time we expect opportunities for further growth. We expect to close the JV by the end of August and will roll it in later this quarter. Add that to the acquisitions we completed in the quarter: while they may not be hugely accretive initially, they are additional points of presence across our network that increase customer touchpoints. When we integrate acquisitions, our national account relationships typically expand the acquired stores' customer lists. We will continue to look at adjacencies that align with our core expertise of selling, servicing, and supporting commercial transportation customers. This JV and the recent acquisitions are strategic moves to expand our capabilities and geographic reach.
Thank you. Our next question comes from the line of Andrew Obin with Bank of America. Andrew, your line is now open.
Hey. How are you? Good morning, Rusty. Just a question on more deals in Canada—how much room do you have in Canada, and is it going to be PACCAR? Is there room to grow the Navistar network? If you can chat about that. Thank you.
The Canadian business we discussed is on the International side. Do we have room for growth? Yes. These acquisitions were done in coordination with the manufacturer, and our agreements involve working closely with them. There are other opportunities in Canada, but I cannot get into specific details as those involve proprietary third-party businesses. We acquired a school bus dealership in Canada last summer that has been successful for us, and our joint ventures historically have been structured with manufacturer cooperation. We currently own 80% of our Canadian JV that we previously structured differently; we are pleased with that arrangement and see room to grow within the framework of our OEM agreements, but I cannot provide more specific detail at this time.
Thank you very much.
You bet.
My apologies. This concludes the question-and-answer session. I would now like to turn it back to Rusty Rush for closing remarks. Rusty, back to you.
Sure. We appreciate everybody's attendance this morning, and we look forward to a solid Q3. We have a call in late October. Everyone have a great close to the summer.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.