Rush Enterprises FY Conference Summary Company Overview - **Company**: Rush Enterprises (NasdaqGS:RUSH.A) - **Date of Conference**: November 03, 2025 Key Industry Insights Trucking Industry Dynamics - The trucking industry is experiencing a freight recession that has lasted for three years, with Class 8 truck order intake being the worst since 2009 during the April to September period [6][10] - The market is characterized by a significant decline in truckload (TL) business, while less-than-truckload (LTL) business remains stable [9][10] - There is uncertainty regarding the impact of tariffs and EPA regulations on truck pricing and demand [10][11] Regulatory Environment - The EPA is expected to maintain NOx emissions standards at 0.35, which could lead to increased costs for OEMs and affect truck pricing [11][12] - The potential for warranty costs to decrease significantly if the EPA regulations remain unchanged, which could alleviate some financial pressure on customers [12][21] Market Segmentation - Rush Enterprises has a diversified business model, with approximately 50% of its Class 8 business being vocational, contrasting with the broader market's 65% over-the-road focus [9] - The refuse truck market is a strong segment for Rush, accounting for about 25% of all garbage trucks sold in the U.S. [43][44] - The construction market has shown variability, with some states performing better than others, particularly California [45][46] Financial Performance and Projections - The company anticipates a challenging fourth quarter and first quarter due to ongoing market uncertainties, but expects a potential uptick in the latter half of the year [10][11] - Projections for truck sales in 2026 suggest a decline, with estimates ranging from 167,000 to 220,000 units, indicating a tough market environment [10][11] Parts and Service Business - Parts and service contribute over 60% of Rush's gross profit, with expectations for this segment to remain flat due to reduced miles driven by customers [97][102] - The company is focusing on expanding its mobile maintenance and repair services, although it has not met its targets for mobile tech deployment [58][59] Strategic Considerations - Rush Enterprises is exploring M&A opportunities to expand its dealership network, particularly for PACCAR brands, but faces limitations due to franchise agreements [70][80] - The company is actively involved in the used truck market, leveraging opportunities from bankruptcies in the trucking sector to acquire inventory [39] Conclusion - Rush Enterprises is navigating a challenging trucking market characterized by regulatory uncertainties, a freight recession, and shifting customer demands. The company's diversified business model, particularly in vocational markets, positions it to weather these challenges while focusing on expanding its parts and service offerings.

Core Insights - Long-term contract rates for dry van truckload transportation have remained stable, increasing only about 1% since July 2024, while short-term spot rates have risen approximately 4% over the same period [1][2] - Despite seasonal pressures expected during the holiday shipping season, demand remains weak, and there is little evidence to suggest a significant increase in contract rates [2][3] - The freight recession has lasted longer than any in modern history, with capacity exiting the market faster than demand is declining, which is unprecedented [3][4] Rate Dynamics - Spot rates have been rising since 2023 but remain largely unprofitable, while contract rates are near the lowest sustainable levels for most carriers [4][5] - The average operating costs for carriers have increased by 33% from 2019 to 2024, while the contract rate index is only 16% higher than its 2019 level, indicating that operating costs have risen at a faster rate than what the market is willing to pay [5] Regulatory Environment - Recent regulatory actions targeting non-domiciled and undocumented drivers have intensified, with plans to crack down on "CDL mills" and the fleets that utilize them [6] - Increased regulatory pressure has begun to affect the rate environment, with spot rates spiking unseasonably in early October due to reports of immigrant drivers avoiding the roads amid heightened enforcement [6]

Core Insights - The Covid pandemic has highlighted ongoing supply chain issues in America, particularly a significant truck driver shortage that continues to affect the industry post-pandemic [1] Group 1: Truck Driver Shortage - There are 7,213 truck driver jobs advertised daily, indicating a potential deficit of 24,043 truckers, leading to a weekly cost of $95.5 million for the freight industry due to unstaffed trucks [2] - The shortage of truck drivers has not improved the economic conditions of the trucking business, with available trucks significantly outnumbering available drivers [8] Group 2: Bankruptcy and Economic Challenges - Supra National Express has filed for Chapter 11 bankruptcy, joining a growing list of trucking companies facing financial difficulties despite high demand for services [4] - Operating costs in the trucking industry have reached record highs while freight pricing has declined, contributing to a prolonged freight recession [5] - The number of tractor trucks exceeds professional truckers by more than 3:1, and when considering all heavy trucks, the potential loss to the industry could reach almost $50 billion weekly due to underutilization [9]

Core Insights - Ryder System reported total revenue of $3.17 billion, showing a slight increase from $3.168 billion a year ago, while non-GAAP earnings per share rose to $3.57 from $3.44 [1] Revenue Performance - Dedicated Transportation Solutions (DTS) experienced a 10% decline in revenue to $570 million, reflecting challenges in the trucking market [2] - DTS revenue decreased sequentially from $606 million in the second quarter, which was down from $635 million in the same quarter of 2024 [3] - Fleet Management Solutions saw a minor revenue drop of $5 million year-on-year, but earnings before taxes increased by 11% to $146 million [5] - Supply Chain Solutions achieved the highest revenue growth among the divisions, with a 5% increase to $1.38 billion, although earnings before taxes fell by 8% to $86 million [6] Operational Insights - Ryder's CEO noted that benefits from strong operating performance and acquisition synergies in DTS were offset by fleet reductions due to weaker freight market conditions [4] - Used vehicle pricing for tractors and trucks decreased by 6% and 15%, respectively, compared to the second quarter of 2024, although tractor pricing remained unchanged sequentially and truck pricing increased by 7% [7] Cost Management - Fuel expenses decreased significantly from $116 million a year ago to $94 million in the second quarter of 2025, providing a positive impact on Ryder's financials [8] - The company adjusted its fiscal non-GAAP EPS forecast to a range of $12.85-$13.05, slightly down from the previous range of $12.85-$13.30, while most other forecast numbers remained unchanged [8]

Core Insights - Truckstop.com has launched the first load board exclusively for dry vans, aimed at providing affordable solutions for owner-operators and small fleets during the freight recession [1][2] - The platform offers a subscription model starting at $35 per month for unlimited searches, granting access to verified loads and real-time market data [1] - The load board is available in two tiers: Basic and Pro, with the Pro version offering advanced features such as same-day rate data and load alert notifications [2][3] Product Features - The Basic version includes access to private loads, data on load popularity, truck count by state, broker factorability data, a routes map, and Canadian loads [2] - The Pro version enhances the offering with SONAR insights, real-time live loads, load comparison tools, a rate-per-mile heat map, multi-trip search capability, and mobile load alerts [3] - Integration of SONAR rate intelligence provides small carriers with visibility advantages similar to larger companies, helping them compete effectively in the volatile freight market [4] Company Background - Truckstop.com has been in business for 30 years, partnering with carriers, brokers, and shippers to create innovative solutions across the freight lifecycle [4]

Core Insights - Triumph Capital's CEO Aaron Graft highlighted unexpected strength in factoring data for owner operators amidst a freight recession [1][2] - Government actions may tighten trucking capacity, potentially marking an "inflection point" in the market [2] Factoring Data - The average transportation invoice factored by Triumph in Q3 was $1,690, an increase of $27 from Q2, influenced by rising diesel prices [3] - The average factoring invoice price for fleet customers was $1,817, down $92 year-over-year, while owner operator invoices rose by $16 to $1,317 [4] Owner Operator Resilience - Owner operators are surviving due to lower fixed operating costs and greater flexibility, allowing them to adapt to unfavorable freight rates [4] - The ability to switch to alternative income sources, such as driving for Uber, enables owner operators to remain active in the market longer than anticipated [4]

Core Viewpoint - J.B. Hunt Transport Services, Inc. is highlighted as a key stock to watch, with its upcoming report expected to provide significant insights into the current economic conditions, particularly in the trucking sector [1] Company Overview - J.B. Hunt provides a range of transportation, delivery, and logistics solutions, including intermodal, truckload, final mile, and freight brokerage services [1] Market Sentiment - Jim Cramer suggests that the company has been vocal about a freight recession, indicating potential challenges ahead for the trucking industry [1] - Following Cramer's comments, J.B. Hunt's stock has increased by approximately 6% [1] Investment Considerations - While J.B. Hunt is recognized for its investment potential, there are suggestions that certain AI stocks may offer better upside potential with lower downside risk [1]

Core Viewpoint - United Parcel Service (UPS) has faced significant challenges in recent years, including a decline in shipping volume and a strategic reduction in its partnership with Amazon, leading to a substantial drop in stock performance [2][3][4]. Company Performance - UPS went public in 1999, raising nearly $5.5 billion, one of the largest IPOs at that time [1]. - The company has seen a decline in stock value, trading down approximately 30% this year and over 50% in the past five years, contrasting sharply with the broader market performance [3][4]. - A $1,000 investment in UPS five years ago would now be worth only $496, while the S&P 500 index would have nearly doubled that investment [4]. Strategic Decisions - UPS announced a 50% reduction in its partnership with Amazon, which was its largest customer, citing slim margins as the reason for this strategic decision [2][3]. - The company is also navigating macroeconomic challenges and the impact of tariffs, which have further complicated its revenue outlook [3][6]. Dividend Yield - Despite the challenges, UPS offers a high dividend yield of over 7.5%, indicating potential for income generation for investors [4].

Core Viewpoint - FedEx shares were downgraded by JP Morgan from overweight to neutral, with a price target reduction of $10 to $274 per share, reflecting concerns over significant headwinds in the logistics sector [1] Industry Overview - The logistics management index indicates a poor state of freight, with September recording the lowest levels since the index's inception, which is concerning as it typically anticipates increased activity for Halloween and holiday seasons [4][5] - The broader economy is impacting freight movement, with tariffs leading to a backlog of goods in warehouses, resulting in a lack of new orders from retailers and manufacturers [5][6] Freight and Transportation Insights - Freight companies are facing reduced revenues as fewer items are being moved, which is critical as they are compensated per item transported [8] - The upcoming holiday season is expected to see lean inventory levels, which will further affect the volume of freight moving from warehouses to stores [9] - Year-over-year data shows a decrease of 1 million containers compared to the previous year, indicating a significant drop in parcels available for transport [11]

FedEx Downgrade & Freight Division Weakness - JP Morgan downgrades FedEx shares to neutral, citing weakness in its freight division [1] - Analysts suggest the freight division's weakness could challenge FedEx's full-year EPS guidance and the planned spin-off of FedEx Freight in June [1] Freight Recession & Industry-Wide Impact - A freight recession is weighing on the entire sector, leading to price target cuts for major players like XPO, Old Dominion, JB Hunt, and Knight Swift [2] - Channel checks indicate price discipline across the industry is weakening, impacting multiples until volume improves [3] - Container shipping on rails is down 1% year-over-year in September, a potential indicator of a broader freight environment slowdown [3] Manufacturing Contraction & Tariffs - The manufacturing sector is contracting, with the ISM below 50 for most of the year, impacting high-margin freight [4][5] - Tariffs are weighing on the manufacturing sector and CEO confidence [5] - New truck tariffs taking effect on November 1st could raise expenses and pressure margins for the entire industry [6] Capacity & Competition - Increased capacity is weighing on pricing in the freight sector, with orders for new tractor trailers jumping double digits year-over-year and month-over-month [5] - FedEx and UPS are facing increased competition in the parcel business from smaller players [7][8]