Rush Enterprises (RUSHA)

Commercial vehicle retailer Rush Enterprises (NASDAQ:RUSH.A) reported Q1 CY2025 results topping the market’s revenue expectations, but sales fell by 1.1% year on year to $1.85 billion. Its GAAP profit of $0.73 per share was 1.4% above analysts’ consensus estimates.

Company Overview

Headquartered in Texas, Rush Enterprises (NASDAQ:RUSH.A) provides truck-related services and solutions, including sales, leasing, parts, and maintenance for commercial vehicles.

Supply chain and inventory management are themes that grew in focus after COVID wreaked havoc on the global movement of raw materials and components. Transportation parts distributors that boast reliable selection in sometimes specialized areas combined and quickly deliver products to customers can benefit from this theme. Additionally, distributors who earn meaningful revenue streams from aftermarket products can enjoy more steady top-line trends and higher margins. But like the broader industrials sector, transportation parts distributors are also at the whim of economic cycles that impact capital spending, transportation volumes, and demand for discretionary parts and components.

Competitors in the commercial vehicle industry include PACCAR (NASDAQ:PCAR), Penske (NYSE:PAG), and Covenant (NASDAQ:CVLG).

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Rush Enterprises’s 6.3% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the industrials sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Rush Enterprises’s recent performance shows its demand has slowed as its annualized revenue growth of 2.2% over the last two years was below its five-year trend.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Vehicles and Aftermarket, which are 61.1% and 33.4% of revenue. Over the last two years, Rush Enterprises’s Vehicles revenue (new and used commercial trucks) averaged 3.5% year-on-year growth while its Aftermarket revenue (parts and services) was flat.

This quarter, Rush Enterprises’s revenue fell by 1.1% year on year to $1.85 billion but beat Wall Street’s estimates by 1.4%.

Looking ahead, sell-side analysts expect revenue to grow 2.3% over the next 12 months, similar to its two-year rate. This projection is underwhelming and suggests its newer products and services will not lead to better top-line performance yet.

For industrials businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.

Rush Enterprises has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 20.2% gross margin over the last five years. That means Rush Enterprises paid its suppliers a lot of money ($79.76 for every $100 in revenue) to run its business.

This quarter, Rush Enterprises’s gross profit margin was 19.3%, down 1.5 percentage points year on year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Rush Enterprises was profitable over the last five years but held back by its large cost base. Its average operating margin of 6% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Rush Enterprises’s operating margin rose by 2 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Rush Enterprises generated an operating profit margin of 5%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Rush Enterprises’s EPS grew at an astounding 18.8% compounded annual growth rate over the last five years, higher than its 6.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Rush Enterprises’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Rush Enterprises’s operating margin was flat this quarter but expanded by 2 percentage points over the last five years. On top of that, its share count shrank by 1.9%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Rush Enterprises, its two-year annual EPS declines of 11.5% mark a reversal from its (seemingly) healthy five-year trend. We hope Rush Enterprises can return to earnings growth in the future.

In Q1, Rush Enterprises reported EPS at $0.73, down from $0.88 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 1.4%. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Rush Enterprises has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.2%, subpar for an industrials business.

Taking a step back, we can see that Rush Enterprises’s margin dropped by 8.9 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Rush Enterprises’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 11.5%, slightly better than typical industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Rush Enterprises’s ROIC averaged 1.7 percentage point increases each year. This is a good sign, and we hope the company can keep improving.

Rush Enterprises reported $228.7 million of cash and $650.1 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $633.6 million of EBITDA over the last 12 months, we view Rush Enterprises’s 0.7× net-debt-to-EBITDA ratio as safe. We also see its $40.02 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Rush Enterprises narrowly top analysts’ revenue and EPS expectations this quarter. Overall, this was a decent quarter. The stock remained flat at $50.99 immediately following the results.

Updated: July 28, 2025 at 11:13 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Rush Enterprises.

We see the value of companies helping their customers, but in the case of Rush Enterprises, we’re out. For starters, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its projected EPS for the next year is lacking. On top of that, its low gross margins indicate some combination of competitive pressures and high production costs.

Rush Enterprises’s EV-to-EBITDA ratio based on the next 12 months is 8.7x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $60.50 on the company (compared to the current share price of $54.75).