Justin Long: Okay. That’s good to hear. And I guess I’ll just ask one more question to your point about the freight downcycle lasting for two years now. I think it’s lasted longer than everybody anticipated. Has that changed your view at all on the trough earnings and free cash flow potential of the business this year?
Rusty Rush : Well, yes, you would reflect on something I threw out there a couple of years ago, that would be trough earnings. And the answer is no way, okay. That’s not happening, okay. I’m more confident in that than I ever have been when I look at the organization right now and how we’re going to market. So I put that out there a couple of years ago, but no, I’m extremely confident in that statement, more confident now than when I made it then, and also in what I think peak will be. If things fall out the way everybody believes it will in 2026, that should be the peak earnings of the organization based upon projections now. Everything can change. The economy can move and change. But based upon all the information we have with all the new EPA guidelines coming into a first of ‘27, et cetera, we’re very confident in both the trough, which, look, ‘24 is nothing more than what I’ve told you the last couple of years, okay.
I told you ‘24 was going to be the, you had a great ‘22 and ‘23, and a good ‘24, but off. I mean, I still think we’re going to be, what is it, 13% off in truck sales so far, but 20% in the month of March, okay. But first quarter was off 13, I know ACT is at 16%, this one time I’m going to say it’s probably going to be a little more off than that. But I do believe there’s going to be a large free buy in ‘25 and ‘26. It’s just difficult for folks. Go look at all the public earnings, all the over-the-road truck load now, LTLs, so obviously still doing extremely well. What happened with the Yellow last year and the way the dynamics are in the distribution business. But look at what’s going on out there. Everybody’s suffered. So that’s why I’m extremely proud of what we’ve done and more confident than ever that we will handle both that, and the free cash flow side will still be extremely strong this year without question in my mind, not as strong as last year.
But it will be extremely strong when you look at historicals for sure.
Operator: Our next question comes to the line with Andrew Obin of Bank of America.
Andrew Obin: Yes, the star one, one thing is confusing, Rusty. Sorry. So question, can you talk about your confidence given the weakness in over-the-road freight? What’s your confidence of actually sort of being able to manage your inventory into the second quarter? And you said that you sort of have confidence in your used truck, but maybe a little bit granularity why you’re so confident given the weakness in the market. Thank you.
Rusty Rush : You bet. Well, it goes back to, first off, we, as I’m going to say in inverted order here, Andrew. I’m going to go to used first. Why? We took down our used inventory we just traditionally carry by 40% over a year ago. We took it down that much, right. We traditionally probably had closer to 2,500 units. We carry somewhere around 1,500 units because when you got into this very accelerated declining environment that used was here over the last two years, you had to be turning fast. So your turns had to accelerate from what maybe they had been historically. So by doing that, we’ve been able to really mitigate any losses that we might be — had been taking in some of our used truck inventory because our turns were accelerated.
And with that, what it has allowed us to do is take advantage of opportunities that are out there, right. So we’ve been able to take advantage of other opportunities because we don’t have an inflated used truck inventory. We keep it at a level and we turn it fast. And so our used, our used is good used quarters. We probably not only say ever had, but we had a strong and extremely strong used quarter, which is quite unusual, not necessarily volume or, but just turning it fast has allowed us to maintain a higher margin. So because we’re not getting caught with used trucks that are decelerating valuations quicker than what historical norms are. When it comes to medium duty, I mean, medium duty, I can look at the order board and I feel good about it.
It’s solid. Where I’m not going to say we’re, all sold out, but unlike the heavy side, we’re way further along to selling out because in some ways in our medium duty side, we still have some allocation reports involved on medium duty because remember medium duty when we had those huge markets in ‘22 and ‘23, medium duty got, especially in ‘22, the manufacturers that build medium and heavy shifted towards the heavy side because they made more margin. So medium duty still has some pent-up demand and along with consumer spending, it’s remaining extremely strong the last couple years, that has a lot to do with driving medium duty sales, okay. So when you put it all together, we feel really good about where medium duty is at for the year.
As I said, we’ve had a good first quarter, second quarter is probably going to be stronger — is going to be stronger than Q2. And I believe that, remember there’s fluctuations by the quarter, sometimes people get so caught up in quarters. But I would expect our second half to be, I’m right now believing it will be just as strong as our first half based upon looking at the backlog of where we’re at with medium duty. Now heavy duty. Well, heavy duty, timing has a lot to do with things sometimes, especially at least in the first half of the year, I have a large inventory right now. If you were looking at my inventory, you’re going, oh my gosh, your inventory is resting. I’m going to say, yes, but understand that the vast majority of that is sold.
