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; and Michael Goldstone, Senior Vice President, General Counsel, and Corporate Secretary. Before I get started, Steve will say a few words regarding forward-looking statements. 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. 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 we believe 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, stronger 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 some of 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 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 adjacent businesses, 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 think 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.
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.
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.
You bet. Regarding 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. We are basically sold out from a large-customer perspective for the Class 8 brands we sell. That does not mean we do not still have a few trucks to sell, because we stock a rather large inventory, but for larger customers we are essentially sold out. We are still squeezing a few in here or there, but it is very difficult given current build rates. What excites me about the EPA announcement is that, even with the commentary period still open, they announced nonconformance penalties (NCPs). That will allow some manufacturers to phase into new technology rather than forcing an immediate cliff change. For example, PACCAR has indicated they will utilize NCPs, and Cummins has indicated a phase-in of new technology while continuing to produce current engines at least through September of next year. That gives a platform to ease into the new regulations rather than an abrupt change. Because of that, I am optimistic about this year and about next year. We are in a transition phase now, but I feel solid about the back half of this year ramping up in the third and fourth quarters. Remember, we are on the retail side; with our current backlog, we should run into Q1 with strong deliveries. I would tell you we have about three quarters of solid backlog as of now, and we will monitor how customer demand evolves as their businesses continue to improve. Right now, many large carriers are experiencing double-digit rate increases, which supports equipment purchases. The availability of known technology with an NCP—at a reasonable incremental cost relative to the overall vehicle price—allows customers to ease into new technologies while still managing risk. So, without giving exact numbers, yes—we expect to ramp up in Q3 and Q4, and given the performance of our customers, I feel good about the first half of 2027 as well. Our largest sector remains the over-the-road business, and the dynamics I described bode well as we move forward.
That is very helpful. Since we last talked in May, we have seen a meaningful increase in truckload spot rates and a sequential step in your parts and service revenue this quarter. How are you thinking about parts and service revenue growth in the second half of the year? Are you seeing any headwinds because this freight market improvement is supply-driven rather than demand-driven?
We have seen headwinds: the parts and service business has been slower to recover than truck order intake. It has been a very competitive environment and customers have been managing spend, similar to household budgeting. That said, as business stabilizes and customers perform better, we expect spend to return to more normal levels. During the quarter we saw parts and service pick up, which bodes well for the back half of the year. Through July we have seen continued gradual improvement—not double-digit ramps, but steady gains—and I feel good that it will be a solid improvement throughout the remainder of the year. One important item: our small customer base—the unassigned accounts—troughed and we are finally seeing that stabilize and tick up slightly. That segment is roughly 30% to 32% of our service business, so its recovery is meaningful. While national account growth has been competitive pricing-wise, seeing small customers return to shops is positive for our mix. Also, increased new truck activity drives upfitting and other service opportunities. So we see multiple drivers for a continued improvement in parts and service revenues as fleet utilization and new deliveries increase. I expect steady sequential improvement for the remainder of the year.
That is all very helpful, Rusty. Thanks so much for the time. I'll leave it there.
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 Class 8 this year and next year. If 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?
At the end of the day, an NCP is going to be a known number and thus hard to mark up beyond pass-through. There will be FET on it, so the effective incremental cost to a customer is the NCP plus federal excise tax. Right now, people are interpreting a Class 8 NCP in the $6,000 to $8,000 range plus FET. There is a commentary period underway, so this is subject to change, and different OEMs have differing viewpoints on the NCP amount and how they will implement changes. Personally, I think the NCP gives customers a reasonable transition option. It allows fleet operators to replenish without taking on unproven new technology immediately. I expect many customers to pay the incremental NCP cost rather than risk early adoption of new platforms. This points to the NCP making 2027 a better year without creating a cliff event; instead, it smooths the transition and may mean 2027 ends up stronger than 2026. From our perspective on the retail side, our backlog and customer demand should carry us through Q1 and possibly into Q2 of 2027 depending on delivery timing. In short, I see limited downside to margins from an NCP because it will largely be a pass-through, and from a customer perspective it eases the shift to new technology.
That makes sense and is very helpful. Can you speak to what trends you are seeing so far in July across commercial vehicle sales and aftermarket, and expand on trends with small unassigned accounts versus larger national accounts?
Truck deliveries are continuing to increase; we are receiving more trucks than before. Keep in mind receipt-to-delivery timing is typically 30 to 120 days depending on application, so trucks we receive in late 2026 may deliver in early 2027. I expect deliveries to continue to ramp from July into September and beyond, though not in an order-of-magnitude spike—rather steady increases. Parts and service: we saw a 4% sequential increase from Q1 to Q2, which suggests we may have troughed and are beginning to recover. That small-customer segment is a significant portion of our parts and service business, and its stabilization is encouraging. We benefit from our diversity across vocational segments—construction, refuse, medium-duty—and those continue to provide service opportunities even if parts of the over-the-road market lag. Overall, I feel we have some legs to this recovery. We have multiple positive indicators: increasing quoting activity, higher order intake, improved freight markets, and now more clarity from the EPA. We are sold out six months out for many classes of trucks, and that was not the case recently. I do not want to be overexuberant, but sequential improvement like we saw Q1 to Q2 is encouraging. Historically, rate recoveries can have 24 months of tailwinds, and if tonnage and mileage improve alongside supply dynamics, this cycle could have some duration.
Any signs on small assigned versus national accounts?
The small carriers that have survived the downturn are likely to continue. If smaller customers missed out on truck buying, they can still find inventory to buy, and with the NCP the incremental cost is not a huge percentage of the vehicle price. Used truck availability will also support demand as new availability tightness persists. Parts and service to small customers is improving and, while still below historical norms, we believe the trough has passed. Overall, expect solid sequential improvement rather than a single dramatic jump.
Thank you. Our next question comes from the line of Avi Jaroslawicz of UBS. Your line is now open.
Thank you. Good morning, guys.
Good morning. On whether we are seeing pre-buy demand this year: the bigger constraint right now is production capacity. We are fairly sold out; there is a little inventory left but not a lot. OEMs may try to increase build rates, but that often requires second- and third-tier suppliers to ramp, which can be the limiting factor. The $6,000 to $7,000 NCP is meaningful but not prohibitive relative to overall vehicle cost increases over the past several years. So while there may be some incentive to pre-buy this year, production constraints make it difficult for many fleets to do so in practice. Regarding 2028 and why pre-buy could occur then: historically, customers prefer proven technology, and technology transitions often have some blips. Customers will value uptime and reliability, so there is an incentive for some operators to acquire proven, current-technology trucks before switching to a new platform that may have initial issues. I have seen this pattern with previous technology changes. Additionally, there are more variables in the near term—tariffs, EPA rules, supplier constraints—so customers may choose to buy proven trucks ahead of larger technology changes. That said, many factors will determine the magnitude of any pre-buy, and OEMs have not yet fully priced or announced how they will price new technology for 2028, so we will watch how this unfolds.
That makes sense. Switching topics to the MCT deal and entry into refrigerated trailer market: how are you thinking about that strategically and long-term? Is this a launching point for further expansion or more of a one-off?
This is not a one-off. We have studied the refrigerated market for well over a year and believe we found the right partner in MCT. It is a sizable business with a similar service-based model to our dealership operations. I visited several of their shops and believe they are a solid organization and partner. The joint venture will be a launching point for growth in the refrigerated transportation market. We expect the JV to be accretive over time. Initially, we will integrate systems and processes, so the near-term results will reflect integration work, but over a couple of years we expect meaningful benefits from combining our customer bases and service reach. The JV aligns well with our core competencies—selling and servicing commercial transportation customers—and there is meaningful overlap in customer relationships. We target closing the JV by the end of August. Along with the ten dealership locations we added this quarter, these moves expand our footprint and allow us to service customers better than anyone else. We will continue to evaluate adjacencies that align with our core expertise in serving commercial customers.
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.
Morning. The Canadian business we discussed is on the International side. Without getting into confidential specifics, yes, we have room for growth in Canada, and we pursued these acquisitions in coordination with the manufacturer to secure their support. We will continue to look for opportunities in Canada where it makes strategic sense, and our existing joint ventures and dealer relationships there provide a platform for expansion.
Thank you very much.
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 look forward to a solid Q3. We will have a call in late October and will see you then. Everybody 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.