Rush Enterprises Inc Q2 2026 Earnings Call

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 speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 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. Good morning, and 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. 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 3-for-2 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 quarterly dividend. 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 in April, 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 there 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 also creating long-term value for our shareholders.

This transaction demonstrates one of our strategies for achieving long-term growth. 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. Parts, service, and collision center revenues totaled $645.7 million, an increase of one and a half percent 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.

With the aftermarket recovery, 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 remained below normal replacement levels during the second quarter. Despite that environment, we sold 3,172 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 that 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 2027 emissions regulations, which are expected to be finalized soon.

With respect to medium-duty commercial vehicles sales, we sold 3,165 new Class 4 through 7 commercial vehicles in the United States during the quarter, down 4.7% 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 progressed, particularly during June. Although ACT Research expects the broader medium-duty 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 customers, 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. 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.

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. 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 our resilience of our diversified business model and our team's ability to execute during a period when commercial vehicle market 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 acquisitions or investments in businesses that are adjacent to the commercial vehicle industry, while continuing to return capital to our shareholders through dividends and shareholder repurchase. 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're the best in the business.

Actually, I know they're the best in the business, and their hard work continues to distinguish Rush Enterprises as an industry leader. With that, I'll take your questions.

Okay, thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brady Lears of Stephens. Your line is now open.

Hey, thanks. Morning, Rusty. Thanks for.

Good morning, Brady. -taking our questions.

You bet. 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 2027 emissions, and then, but just yesterday, a large public truckload carrier mentioned doing a strategic pre-buy. Can you just talk about what you're 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?

Well, from the back half of the year, obviously, as I mentioned in the release, we expect to ramp up fairly well. Our backlog is as big as it's been in a couple of years, to be honest with you, where we sit right now. I'll tell you, we're basically sold out. That doesn't mean we don't still have a few trucks to sell, obviously, because we stock a rather large inventory here. But from a large customer perspective, we're basically sold out in what we sell for both our brands on the Class 8 side. We can still squeeze a few in there, here or there, but it is very difficult given the current productivity, or should I say, the build rates that are going on right now.

I guess the most exciting thing to me with the EPA coming out with what they have now, understanding that we still have a commentary period going on right now. When they announce what the regs would be with the commentary period still out there, they did announce NCPs, or non-conformance penalties. Which will most probably, at least for some manufacturers, have already mentioned what their plans are for 2027, which will be utilizing NCPs. I know PACCAR is going to, I know Cummins is going to do a phase-in of their new technology, but they will continue to produce old engines at least through September of next year. I think that gives a nice platform to really ease into the new.

It sort of excites me about next year, to be honest with you, as to what next year will look like, because we're not having a cliff event where everybody's just going to new technology. We will ease in to new technologies if any certain manufacturers choose to. Those are two that I know about. Not everyone has come out and said what their plan is yet, but I do know if I'm a customer and my business is showing the dramatic increases I think that we see in all the releases that are coming out, maybe not reflected totally in Q2, but the beats that I've seen and the optimism that I've seen, that allows you to further test new technologies while still buying at a decent current non-compliance penalty. Not too burdensome, I would say, given the overall cost of vehicles.

That allows you to ease into new technology. With my business getting better, I personally feel that there may be some upside to 2027 at the moment, given what the EPA has come out with. As we ease into it, almost move it all out sort of towards first of 2028 for some OEMs, at least those two that I mentioned that have already announced, and we'll wait to hear what others are doing. Right now, business is solid. That just came out two and a half weeks ago or so. Really now we're just getting into where we can truly quote into 2027. We're right in that transitionary phase, but I feel solid about the back half of this year for sure, without getting into exact numbers, but obviously ramping up into the third quarter and ramping up into the fourth.

Remember, we're not in the production side, we're on the retail side. We for sure should run in through Q1 with what our backlog is for sure. I would tell you we've got three quarters of solid backlog probably right now currently, and we'll wait to see how customers view and how their business continues. If their business continues to improve, but right now, most people believe it will. You're talking about double-digit rate increases for some of these guys right now.

With technology, with stabilization of old technology still going to be available, even if at a little bit higher price, without taking on emerging new technology, with maybe some possible question marks that always come with new technologies, I feel good about at least the first half of 2027 and probably on through the whole year, especially based upon the performance of our customer, our largest sector. Obviously, we're big in the vocational business too, but the over-the-road business is still the largest sector in the Class 8 market out there. I think all those things I mentioned bode well as we move forward for the foreseeable future.

That's very helpful. Thank you. Since we last talked in May also, we've seen a pretty meaningful increase in truckload spot rates. We saw a nice sequential Yeah step-up 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? Just, are you seeing any headwind to parts and service revenue, just due to the fact that this improvement in the freight market is supply-driven and not demand-driven?

No, I think we've seen it. We have seen some headwinds. The parts and service business have been slower recovery than our order intake from a truck perspective on the Class 8 side. It just has. It's been a very competitive environment as people continued to manage their spend. Just like I tell people, it's just like you manage your household spend when it goes down. Now that we're seeing stabilization and business performing better from a customer perspective, we expect that spend to get more in line with normal activity, what we would consider normal activity. It's been tough for a while now on the parts and service side. We've been pretty flat. With some margin compression driven by the competitiveness of the marketplace. As the quarter progressed, we saw it picking up, which bodes well.

As we get into the back half of the year, there's no question in my mind, and I'm even through so far in July, we've seen continued, not ramping up double-digits, but gradually improving and feeling really good about, it will be solid improvement throughout the rest of the year. We feel good about that. We really do. Are we where we need to be? No. Are we improving? Say really a lot over the last 45-60 days, can we see it? Can we feel it? Can we look in our backlog in our shops and see that increasing? Yes, we can. I think one of the things that's really important is that for the first quarter in a while, our small customer base, I've talked about them before. Our unassigned accounts. We've been crushed the last three years in that area.

Every year it's been down double-digit 10%. We've finally seen a trough in that, which is a good thing to see. Up slightly, small single-digits. Obviously, that's roughly 30% of our service business, 32% of our service business. While we've seen growth in national accounts, it's been very competitive pricing, but feeling like we're going to see the small customer show back up, which is usually better for us, or it's part of our mix that we've really been missing, that's been declining for us. There are many things, along with also increased new truck activity.

I mentioned in the release, and I mentioned in my earlier comments that, there's upfitting and a lot of things that go on because of our diversified customer base when you're in the construction and refuse and these other businesses, and even in the over-the-road businesses produce when you're installing APUs and doing all kinds of different things that come off of truck sales. I'm giving you a few different anecdotes here to why I feel good about it, that I believe it will continue to improve throughout the remainder of the year, would be what I would tell you. There's not going to be this one-month dramatic jump, but I do believe sincerely that it will continue to improve and continue to ramp up with everything. As much as anything, given the health of the overall, the largest customer base we have, the over-the-road business continuing to improve.

That's 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 Kuzens. Sorry about that. Perspective, it sounds like to me.

Your line is now open.

Hey, guys. Thanks for taking my question.

Good morning. From a build and demand perspective, it sounds like the new EPA proposal could be good for the Class 8 industry this and next year.

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?

I think you answered the question, if at all. At the end of the day, an NCP is going to be a known number. It's going to be hard to mark up a known number driven by the federal government. How about that? Okay. To be honest with you, there'll be a pass-through. There'll be FET on it. Right now, a Class 8 engine is in the $6,800 range, the way most people are interpreting it. As I said, that's plus FET. Your 12% federal excise tax on top of that. At the same time, there's a commentary period going on right now, so it is subject to possible change. I do believe there are differing viewpoints on this by different OEMs, and I'm not going to get into all of it here.

You can ask them individually yourself, but I do believe they have different opinions of the NCP, the amount of the NCP, et cetera. Personally, I think it's fairly fair. It allows for a transition, I'm sure that it will be like this is not known, but my own thoughts, my own opinion, is that will be a one-year type scenario, and then it will ramp up a lot more by the first part of 2028, which will probably make, by that time, I would expect everybody will be rolling in their new technology anyway, and it won't be much difference. To me, it makes a little sense from a customer perspective. Look, I know certain OEMs felt certain ways about it. At the same time, if you take a customer sentiment, they're happy about it.

This allows them to come off three and a half years of freight recession. Just beat up terribly over the last three and a half years. This allows them to gather themselves, maybe replenish their fleet with some older technology, known technology, as we roll into new technology from an aftertreatment and even a little bit, there's a little more than just the aftertreatment that goes into some of these engines, depending on who the manufacturer is. I don't see a lot of downside from a customer perspective. Like I said, different OEMs are going to have different opinions, but customers will probably be pretty happy to have an NCP, a choice, and then watch it transition later through the years, what I think you'll see for most folks. It's not a cliff event.

It just makes sense for an industry, from my perspective, coming off of a terrible freight recession, longer than I've seen. It allows them to get a little healthier without having the risk of technology, the engine in their trucks without that risk, and they can try out more, right? I would expect customers to buy some new technology and run some new technology from certain OEMs that offer both platforms. That's what Cummins, I think, mentioned. They're going to roll in as the year goes on some and transition in. Different OEMs have different opinions from a customer perspective. I think it's pretty good. I don't consider this a pre-buy year. You mentioned the word pre-buy. We're going to end up the year over what the last 10-year average was.

We did 95,000 in the U.S. Class 8s in the first half, and we've averaged around 230 the last 10 years, okay? Well, that means there's 135 to roll in, which is close to a 40% retail upside in the back half of the year compared to the first half of the year, which gets you right back. You're going to be very close to what the annual average has been in the U.S. over the last 10 years. I do not consider 2026 a pre-buy year. I could see a 2027 with NCPs out there. ACT has already got 2027 higher than 2026 because of the slow start to 2026.

I could see 2027, you might eventually get to where you call it a pre-buy if there eventually is sort of more of a cliff with technology changes coming forward, by the time we get to the first of 2028, along concurrently with customers' health better than what it was this year, right? There's my opinion right there, okay? It's not set in stone, but I think it's a possibility. I think we just have to let it unfold. I do believe NCPs are going to make 2027 a better year without a blip of any kind as we roll into it. Remember, like I said, for us as the retail then, we should be rolled with what we've got in the backlog through the first quarter, if not into the second quarter, some, with what's in our backlog.

With NCPs and customers' health getting better, there may not be a blip if a technology change go about. People will just pay that extra $7,000 or so and roll right along, right? Because they're getting old technology, proven technology, while just paying a little price for it that's not too exorbitant. Just my thoughts. That all makes sense, and it's super helpful, Rusty.

Maybe just also, can you speak to what trends you're seeing so far in July, whether it's across commercial vehicle sales or aftermarket, and maybe expand a little bit more on the trends you're seeing with small unassigned accounts versus some of your larger national accounts please? Thank you. Sure. Yeah, I touched on a little bit of that earlier, I don't mind being a little bit repetitive.

Obviously, truck deliveries are going to continue to increase, right? We're receiving trucks more than we have received before. Remember, when we receive trucks, it is typically 30 days, depending on applications, to 120 days before we deliver to the end user. I expect July, August, September and throughout to continue to ramp. It's not going to double or anything like that, but if you were to ask me about truck in this quarter, we'll be up 15% or something. Remember, our carry is going to go into next year. Like I keep saying, the stuff we build in December will not be delivered in this year. It will get delivered into January and February. Some stuff in November will.

This will ramp for us and continue to ramp as we go forward. Parts and service, I already said I expect it to continue to get better. I've listed a multitude of reasons why, right? Which the small user being one of them, right? We saw a 4% sequential increase from Q1 to Q2. Not a lot, but we did see that. While still very depressed from what it was, say, three years ago, at least you feel like you're bottoming, right? Hopefully you're profiting and that from that perspective and you've got upside. That's 30% of our parts and service business that we've been fighting. We've been fighting that really hard the last couple, three years and producing the results we have, given the diversification, whether it's by that customer segment or market segment or whatever. We deal with a lot of markets.

I know I've talked a lot about just over-the-road here this morning, I do not want to forget about our vocational businesses, whether it be in construction or refuse or whatever vocation it might be in, or our medium-duty platform, right? Those are all things that go. We work on everything in our shop. The over-the-road business gets the major focus because it is a huge, it's the biggest market. Yet at the same time, we supplement it with diversity from a geographic and a market perspective. I feel that it's going to continue to get better. I don't want to get over-exuberant this morning, I think there's some legs. I do believe that we got some legs on this now, especially when I talk to customers, when I see what's going on. We're not totally done with the EPA.

As I said, we're in a commentary period, we pretty much know that they've cut the warranty, right? Warranty stays where it's been, okay, on the after-treatment. It doesn't go to some 10 years warranty that was costing an extra, the government said six, seven, $8,000. That was going to have to be priced in, right? We've changed the length of the life expectancy. We've done some things, the government has, to solve, and while still going towards the 0.35 eventually, NOx submissions to begin with. We have also the credit perspective, there's a lot of things that go into all that, I'm not going to get into. There are many. I can sit here and talk. There are many things that I think are positive, right?

Not all of them will probably come to pass, but there's a lot of, should I say, positive feelings around our industry right at the moment. When you're basically sold out for the year, we haven't done that in a while, six months out. Rolling into next year, I feel good about us. We're going to have inventory to sell to that is not sold. Because with most, a lot of this business has been fleet business. There's just positive things, man. I could go on and on. I'm a rambler, so, but I don't want to get ahead of my skis. I don't want to get out over my skis either. This still has to come to pass. At the same time, I can't sit here and give you negative thoughts that I may have in the past. Allow it. Allow it to come to us, and I think that's what we'll see happen.

We'll continue to see improvements like we saw from Q1 to Q2 from a result. Even though it wasn't all top-line driven or margin driven, we managed this company from a G&A perspective extremely well in the quarter. I'll be quiet. Yeah, last one.

Any signs on the small unassigned versus the national accounts?

The small, well, the small guys, if they missed out from a truck sales perspective, tell them I might have some inventory they can buy from a parts and service perspective. By the way, they're going to be able to buy next year with not that big of NCP. $7,000 isn't that bad. In reality, when you're talking about vehicle or $1,000 vehicles here, okay? You're not talking about some 10% or 15% price increase here, right? You just may be a little longer to get it as their business improves. That's what's driving used to be better, right? Is lack of availability of new, that's what's going to make the used market stay solid. It's really on the parts and service I just spoke about. I think I said we were up 4% sequentially. In my mind, just call it flat.

We were trough. We'd been going through 3 years of year-over-year double-digit decreases. That means it's the health of even the smaller carrier, in spite of all these fuel issues, right? In spite of all the geopolitical stuff that's going on. I've been fairly amazed at the resilience of the market. Of course, that has to do with the business model and the pass-through of fleet to the shippers that have gone into place for the last 30 years. At the same time, I feel good about it. I think the small carrier is, if he's survived this far, he's going to make it, okay? If they've made it this far, though, that's the good ones, and they're the ones that are going to make it, and they will go. They'll get their spending habits back more in line with what they would be normalized spending.

That doesn't mean they're going to spend, but they're going to get back to more normalized maintenance and repair, and that just bodes well for us. There's more miles being driven. You're talking about supply being driven down, that drives the miles up on the ones that are driving. I could go on. Things just continue to look for solid sequential improvement. Not we're going to double or anything like that, solid sequential improvement, which is good, I think, for a longer period of time. Most people believe that this freight recovery should have 24 months on it or so. We've been around long enough to know this thing's cyclical but should have some legs on it for a while. Driven by supply coming out. We're getting some growth on the other side, too, the coin.

If that continues to improve from a tonnage and a mileage, from a load perspective, you have a couple years of legs on this thing.

Okay. Helpful, Rusty. Thank you. I'll turn it back. You bet.

Thank you. Our next call comes from Avi Yarilovitz of UBS. Your line is now open.

Thank you. Good morning, guys.

Good morning. Yeah, Rusty, I know you've 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 don't really think we've seen or you're seeing pre-buy demand this year?

Or is it really more about just how much the OEMs can produce? Because thinking about $6,000-$7,000 NCPs before the FET, it's not nothing for next year.

That's right. Wouldn't there still be some incentive to pre-buy this year?

Well, the problem is production, right? I think we're fairly sold out. There's a little left out there, but it's not a lot, and I'm sure it might get a little pricey. You know how it is. I would tell you, we're fairly sold out. All right? Most OEMs are. They may not say they are, but what they do have left-- By the way, that doesn't mean they cannot figure out how to produce more, okay? Based upon current build rates, you could see some build rate increases that will produce a little bit more capacity. They've got to get in place pretty quick here because it's not that easy to ramp up. I don't expect people to be putting on extra shifts. I expect people to be maximizing. Look, I'm speaking for the OEMs themselves, and I don't like doing that.

I would imagine they will tweak as best they can to make sure they're working weekends, and doing everything they can. I would tell you, what's going to happen, typically happens right now, is you're asking the second and third-tier suppliers to ramp up. Okay? That is fairly difficult for some of these folks to do. Not necessarily the OEM. It's not necessarily OEM constrained. It's constrained with the second and third-tier suppliers. They manage that part of it. I realize $6,000, $7,000 is something. At the same time, with improving business conditions, and then with a known technology, that's a proven technology, without any changes, that's why I feel the rollover will just roll into 2027. Yeah, it's a little money, but at the same time, it's not the end of the world given what these vehicles cost nowadays.

The trucks have gone up in the last six years, like 35%, man. By the time we get to next year, it's crazy. It's a production problem. At the same time, I go back when you said, I hate this word, pre-buy. It's still going to be around the average total, that's all I can tell you, delivery-wise. The production side might be higher, but it'll roll into Q1. Again, I go back to, with the EPA saying what they said, if these numbers stick, definitive numbers on an NCP, and customers' business getting better, I just think this rolls over and continues into 2027. I could be wrong. It's just my opinion, without much of a blip. Customers' businesses, from the old road perspective, ramped up quite dramatically here the last four or five, six months. I see a lot of positive out there.

That was after last year was under, and the first half of this year was way under what replacement was. I see replacement catching back up. Right now, we're just catching replacement. We'll have to see if anybody tries to grow. They usually do. That creates a cycle, eventually. Like I said, we're pretty much production constrained, outside of any OEM increases. I know they're trying, but I'm going to let you talk to them about what they're able to do.

Right. Okay. I understand that. One of the things you mentioned there was potential to see some pre-buying next year ahead of the engine changeover in 2028.

Yeah. How are you thinking about those dynamics?

If $6,000 to $7,000 increase for next year is manageable enough, broadly speaking, the incremental cost increase in 2028 wouldn't be in that ballpark even. It would seem to be a little less than that. There's more time to get these engines tested and work out the bugs in them. Why would you expect a pre-buy potentially next year?

Because it's proven technology. Okay? Because it's proven technology. I've been around a long time. I've seen technology changes before. I've never seen one without a blip. That doesn't mean it's the end of the world, but I've never seen one. I go back to 2010, when we switched to DEF. There was more clogged particulate filters around this country than you could shake a stick at. Okay? Our shops were full of them. Anybody with a memory knows that it's never as smooth as you anticipate. Maybe I'm wrong, but typically, in this one, not everybody's using the same technology. Not everybody's going to DEF like it was at that time. I'm not an expert on all of them, but different after-treatments. Not exactly the same as how they go to market.

I have to believe that if I'm a customer, I'm willing and wanting to have more of what proven is and be the last one to join the new. Even though people will say, "We'll get better fuel mileage" and things like that. I know that uptime is the most important thing I have going for me. Proven technology allows you to understand what your uptime is, and your reliability is. That's my opinion. It's just an opinion, but it is mine, that customers would prefer to go with proven technology. There'll still be a little bit of an increase, even for the new technology. I realize maybe it's $4,000 or $5,000, when we get to 2028. Who's to know? I'm not here to tell.

There's some other things behind the scenes you've got to remember that have gone on in the last year that make this an interesting time. There's been tariffs and things like that affect different OEMs different ways. I'll just say that. We'll have to wait and see what that pricing will be the first of 2028. Neither. Yeah. The two OEMs I represent have not priced new technology.

How about that? Okay. How am I to know what it'll be? I know what I'm roughly told, but it has not been priced.

Okay. Yeah, that's fair enough. Definitely interesting times. Yep. There's a lot of variables out there right now.

There really is. You throw in all the tariff stuff from the last year, you throw in the EPA stuff. There have been more variables in this, whatever, 12-month window, than I've seen in a long time. A 16-month window, go back last April of 2025 with tariffs starting up, now roll in the EPA variables that we're dealing with now. There's just a lot of variables out there for manufacturers. There really is. Right. Yeah, no, that makes sense.

I just want to switch topics maybe 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 you're thinking about that as a strategic move and the long-term vision here. How are you thinking about continuing to grow within that space? Really, is this a launching off point, or is this more of a one-off type of deal?

Well, first off, no, it's not a one-off deal. We're committed to the space. We've studied the space for a while now, for well over a year, and we think we found the right partner as the launching off point. Okay. A sizable deal inside of a market that is obviously not as large as the truck business, but at the same time, a very similar business model, right? It's refrigeration units. I've been through their couple shops, with Bill and the gentleman that we're doing the JV with, and that's a solid organization we're partnering with. I do believe it's a solid manufacturer that we will be able to grow with. I'm not going to put numbers on that growth, right? We haven't even closed the first JV or the first deal. That JV will be looking for growth as we go forward.

It's not a one-off, for sure. We've had these discussions. We've had these discussions, and we feel good that we're going to be able to bring even a stronger balance sheet and partner well with the organization that we're doing the JV with. Over time, those opportunities that we believe will be there for us for further growth. That's what we're not getting into it for a one-off, that's for sure. It aligns perfectly with what we do. There's so much overlap in customer base that we believe that relationships that we have, we'll be able to bring to the table and also leverage off relationships that this organization has. I think it's a win-win for both MCT, for a Carrier, and for Rush. Now, the proof of the pudding is in the eating, so we got work to do, right?

I'm extremely excited about it. Should get it closed by the end of August, I think, is the timing for it right now. That's what we've got targeted, I think August 31. We'll roll it in later this quarter. You add that to the acquisitions we did earlier during this quarter. While they may not be hugely accretive to begin with, those 10 dots, those are 10 more dots on the map for Rush that allow us to service a customer base better than anyone else from a service perspective. No one has as many dealerships as we do scattered across the U.S. and Canada. We leverage off of every, regardless of who we represent, it's Rush Truck Center first and foremost, and when it comes to how we interface with customers.

That ability, don't worry, they will be accretive, but we've got to get our systems and our things into place. It's great to have the state of Louisiana represented on the Peterbilt side and on the International side. What we did up in Canada, I guess there's 20 locations in Canada, and just further increases our customer touch, both areas. Louisiana, further across the Interstate 10, we almost got it. We don't have it all covered, but we got most of it all covered across the U.S., across I-10, which is obviously a large corridor for the South, from a long highway perspective, and even for large vocational customers where they have operations. When we do one of these deals, I'll tell you something interesting. I went over and visited the stores, and I told the stores in Louisiana, I went and visited three of the five.

I told them, I said, "Look, one thing I can promise you is that a year from now, you're not going to know 50% of the customers in your shop. Why? Because when we take on an acquisition, we bring a huge customer base with it, especially from the national account perspective." Right? Now we have to grow the sales forces, grow our parts and service sales forces, get out there and use our standard operating procedures and get in there and do it. That's exciting. It's not an add water and stir thing, I can guarantee it'll be, a couple years from now, it'll look a whole lot different than it does now, for both of those acquisitions, just because of how we go to market, and we're looking forward to growing the other.

I'm telling you this, we will continue, as I mentioned, if you heard me in the script, we will continue to look at other adjacencies that make sense around the core expertise of Rush Enterprises, which is taking care of selling, servicing, and taking care of commercial customers, both large and small, transportation customers. It will be something around that core expertise. There are other adjacencies that I do believe that we'll continue to look at while growing the one we just entered and continuing to look for growth across our dealership network at the same time.

All right. Sounds good. Appreciate the thoughts and the time. Thank you. You bet. Thank you.

Our next call comes from Andrew Obin with Bank of America. Andrew, your line is now open.

Hey, how are you? Good morning, Andrew.

Good morning. Just a question, more deals in Canada, just how much room do you have in Canada, and is it going to be PACCAR? Is there room to grow Navistar frame or network, if you can chat about that? Thank you. Yeah. The International side, Andrew.

Without getting specific, do I have room for growth? Yes. Okay. That is a combination of working with our manufacturer. Both of these acquisitions were not done just us running off. They were working with the manufacturer, getting their blessings around it. I would tell you that there are other opportunities up there. Obviously, I can't get into more details, but we do believe there are other opportunities, and we do believe we have room for growth, given the framework of our agreements with them in Canada. I'm not going to get any more specific. If you remember last year, we acquired a bus dealership in Canada last summer, which has been very successful for us. School bus business with International. We will continue to look at those opportunities, Andrew. Remember, that's a JV for me.

We did that back in 2019. At that time, it was 50/50. We currently have it at 80/20, obviously 80 us. Very pleased with that joint venture and looking to grow it, I'll be honest. There's room. I just really can't get into the specifics. That obviously involves other people's businesses, proprietary businesses. I don't want to talk about it. Yes, we have room in our agreement with the OEM. Now we do it lockstep hand in hand with them. There is room for sure.

Thank you very much. You bet.

Okay. 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 and have a call in October, late October. We'll see you then. Everybody have a great close to their summer.

Thank you for your participation in today's conference. This does conclude the program.