Good day, and thank you for standing by. Welcome to the Rush Enterprises, Inc. reports third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rusty Rush, CEO, President, Chairman of the Board. Please go ahead.
Well, good morning, and thank you for joining us for our third quarter 2026 earnings call. With me this morning are Steve Keller, our Chief Financial Officer, Jody Pollard, our Chief Operating Officer, Jay Hazelwood, our Vice President and Controller, and Michael Goldstone, our Senior Vice President, General Counsel, and Corporate Secretary. Before we get started, I'll turn it over to Steve for a few 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 discussed or in our annual report on Form 10-K for the year ended December 31st, 2025, and in our other filings with the Securities and Exchange Commission.
Thanks, Steve. We had a strong third quarter. Revenue was approximately $2.1 billion, up 12.4% from a year ago, and net income was $78 million, $0.65 diluted share, and up 18.2% from a year ago. We also declared a quarterly cash dividend of $0.14 per share. The biggest drivers this quarter were higher new truck deliveries and improving aftermarket activity. Freight conditions have continued to get better following a prolonged downturn, and we're encouraged by what we're seeing as we move through the fourth quarter. The quarter also demonstrates the value of the diversified business we've built. We serve a broad range of customers across multiple parts of the commercial vehicle market, giving us different avenues for growth as conditions improve. During the quarter, we completed our 50% investment in MCT Companies, giving us a meaningful entry into the refrigerated transportation space.
MCT operates 17 full-service dealerships and three mobile service locations across six states. This is a great strategic fit and another step forward, providing customers with more of the products and services they need to operate their fleets. Parts, service, and collision center revenue was approximately $680 million, up 5.8%, and aftermarket operations generated nearly 63% of our total gross profit. Excuse me. Our absorption ratio was 128.3%. Demand improved across our customer base, with particularly good growth in energy and wholesale. We also saw encouraging improvement among smaller local customers. We expect that momentum to continue, allowing for normal seasonality. Trucks we are delivering from our backlog should also help create additional parts and service opportunities. At the same time, we are focused on operating efficiently and capturing more of our local customers' maintenance and repair business. Class 8 was particularly strong.
We sold 3,880 new Class 8 trucks in the U.S., up 24.4%, compared with industry growth of just over 10%. That brought our Class 8 market share to 6.5%. Over-the-road customers drove much of that growth as improving freight rates and need to replace older equipment supported demand. Our backlog gives us good visibility in the strong fourth quarter and first quarter of next year, although supply constraints could affect the timing of some deliveries. The bigger question right now is new order activity. Quoting and orders have slowed as customers wait for clarity around the EPA's 2027 emission rules and ultimately manufacturer's pricing. We view that largely as just a timing issue. Underlying demand remains healthy, and we expect ordering activity to improve once customers have the information they need to make replacement decisions. Medium duty also performed well.
We sold 3,265 Class 4 through Class 7 vehicles in the U.S., up 9.6%, while the overall market was essentially flat. Several large fleets that had deferred purchases earlier in the year took delivery during the quarter and our ready-to-roll inventory helped to serve customers as manufacturer capacity tightened. We remain positive about medium duty demand going into early 2027. We added inventory during the quarter to help manage possible production constraints, which should put us in a good position to respond to customers who need equipment quickly. Used truck demand was also healthy. We sold 1,913 used commercial vehicles, up 5.5% over last year, with demand particularly strong among smaller fleets. Limited new truck availability and expected increases in new vehicle prices continue to make used equipment an attractive alternative for many customers. Our leasing and rental business also had a good quarter.
Revenue was $98.2 million, up 5.3%, driven by improved rental utilization along with continued growth in full-service leasing and contract maintenance. We expect rental demand to remain healthy into next year as some customers consider alternatives to buying a higher priced new vehicle. Overall, I am pleased with how the business performed this quarter. We generated strong growth, gained share in both Class 8 and medium duty, saw continued improvement in aftermarket demand, and maintained a very strong financial position. During the quarter, we repurchased $10.3 million of our stock, paid $16.4 million in dividends, and ended September with $226 million in cash and cash equivalents. Going forward, our focus remains pretty straightforward: serve our customers well, make it easier for them to do business with Rush, and continue investing where we see attractive opportunities. That is what our total solution strategy is about.
We want to support customers across the life of the vehicle, from the initial purchase through parts and service, technology, leasing, rental, and other solutions. The more effectively we do that, the more valuable those relationships become for both our customers and Rush. Finally, I want to thank our employees. Their hard work and commitment to our customers are what make these results possible, and I appreciate everything they do for Rush Enterprises. With that, I will take the questions.
Thank you. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Andrew Obin. Your line is now open.
Good morning. Rusty, we talked about it, Rusty, Steve. Maybe we can talk about just regulatory uncertainty and how it impacts your customer behavior going to 2027. Thank you.
Sure, Andrew. Well, it is a great question, Andrew. I could probably ramble on for 20 minutes talking about it, but there is no question that getting regulatory answers from the EPA is critical for manufacturers and customers alike. You may remember, I am going to try to make this as short as I can. The EPA came out and gave a draft back in July about what the changes they were making to the January 1, 2027 rule. Basically, they said they were going to allow nonconformance penalties if you chose that, which means you could carry the old engine that we had and still sell it, but there would be a penalty. Heavy duty was around $6,700, medium around $4,400 plus FET on the heavy duty engine.
Or you could bring on your new technology, which would meet the 0.35 grams, whatever it is NOx that the law has been written for a while. In doing that, you could also use credits to buy that down from 0.65, okay? To 0.35. Okay? So you really had different choices. They got rid of the warranties, they said, because they're supposed to be a 10-year warranty on aftertreatment, excuse me. And it was going to go back to the regular one-year standard warranty on aftertreatment, not 10 years. And also, some other provisions inside that really weren't quite as expensive, but some other provisions they had out there. Now that's a draft. So it was up for review, a commentary period. All the comments came back. We kept hearing we're going to get the final decree in November.
Now in the last couple of weeks, I'm hearing that we're not going to get it in November. There's been some things that have gone on, I think, in the EPA that are going to delay it. And possibly, I don't know this for a fact, but possibly we're going to be told just to work off a draft. We'll get the final decree out in January or February, but it's got to go in the first of January. So it's kind of up in the air as to exactly is that really going to stay the same? Are they going to make adjustments? Will they make NCPs up or down? We don't know, okay? But you're going to have to go off the assumptions that the draft will stay the same, I believe, unless they do come up with a final decree.
That being said, all the manufacturers are taking different paths, and that's fluid also. I do know that Paccar is all in on NCPs. I know that Cummins is in on NCPs through the end of September, rolling in new technology. International is going to go with NCPs for probably four months and then roll into the new technology through the summer. Freightliner is not going to do that. Freightliner is going with the new technology right out of the bat, right out of the chute. Volvo, I feel sure I know they got new technology. I think they might have a mix. So my point to you would be that it's all different across the board. I've never seen a law, and I'm pretty old, right? In fact, I'm really old.
I've never seen an EPA law or decree where it wasn't the same for everybody on one particular date. So it's sort of in some ways punted the full implementation of the January 1, 2027 EPA law to where it's sort of spread out. Some will come in on January 1. Some may not do it till the following year. You don't know. NCPs, there's no close on the date on it, but it would probably go up a rather large amount in January 1, 2028. So I would imagine that it will allow from a customer perspective. I don't believe we've had time to truly test these engines. That's my personal belief. So I do believe it gives customers a chance to not have to roll right into this new technology because everybody's aftertreatment's a little bit different. Okay? I could talk forever. Okay?
All the manufacturers are going about it a little bit different. I think from a customer perspective, I would be leaning towards wanting to pay some NCPs, that is my personal opinion, and roll in and test the new technology before I go all into the pool. Let us dive into the shallow end, not the deep end.
Let us ease our way into it. If I am a customer, that is how I would approach it. But I am not a customer, I am just a dealer. But I have talked to many of them, obviously. I just came back from ATA, and that is definitely how a few of them talk. I am sure some will go in with the proper assurances, but the manufacturers we represent are going to ease into the pool. It is going to be the best way for me to tell you, as I just went through.
But it is all over the board, and with still uncertainty driven by our great government that cannot seem to write a final decree. But I know there is a lot of legal ramifications. They have to be very careful with the changes. They have tried to make it easier for customers by allowing NCPs. Most customers would prefer that. And then test. I do not believe customers have been given enough time, in fact, I know they have not, with anybody's technology on the aftertreatment to test it. Most folks want to run this stuff for over a year plus before they roll it into their fleet, because we have seen throughout history that new technology is not always running just right out of the gate. There are adjustments that have to be made, and sometimes they can be major adjustments.
I go back to something that is as simple as going to DEF, which we did in 2010. When we went to the blue, to the DEF, like Europe, SCR technology. I am going to tell you, there was clogged particulate filters all over this country. Traps and stuff. Our shops were full of these kinds of things as we rolled into that. Even something that had been running for years in Europe, we had issues with implementing here in the U.S. So, people remember those scars, so they would, in my mind, prefer to roll into it. But I am done. Like I said, I could talk forever about it, and you have got my opinions on it. They may not be everybody's, but they are mine.
The lay of the land, which is different depending on who you are talking to, and we are waiting to hear, it would be great if we could at least get a final decree, because no one likes working off a draft. And then you get stuff on order and things happen, and the decree comes out, and it can get a little messy in my mind if we do not get a decree out.
Thank you. Rusty, great. I appreciate your comprehensive answer. Maybe another question is, on any potential disruptions to OEM's ability to ship trucks to you, given potential supply chain constraints over the next couple of quarters, how that thinking has evolved and what do you think, given that, both shipments and orders will look like over the next couple of months? Thank you.
Sure, that's a good question. Anytime you ramp up like these manufacturers have, some of these folks have had six- eight increases or more throughout the year. Now, they've ramped slowly up, I know. I know both my manufacturers are running at full tilt. What happens is you put a big strain on the supply base. It's not always just the number one supply base. It's not your tier 1. It's your tier 2 and tier 3 suppliers that you're asking to add people, add all these resources, and ramp up for a big six-month period. You can't guarantee them because the Class 8 truck market's always what it is. It's a little volatile. You're asking them to ramp up 80%.
Well, then you can't guarantee and ramp down, so then it's about hiring people, training people, getting going, and giving them. So it does put a strain, is what I'm saying, is that really on that tier 2, tier 3. There are some cases at tier 1, I'm not going to get specific, that have popped up here in the last couple weeks, that are going to make some of these deliveries get stretched out. It's not one OEM, it's all OEMs that are affected. So I think some people make it. No, it's the OEMs we represent, it's the ones we don't represent. So what happens is you're trying to keep the lines running good, and what happens is you're short what I call tier 2, tier 3. You're short this gauge or you're short this lens or something.
Well, you're not going to just stop the truck and leave it on the line. You're going to take it off, make sure everything's fine, get it tested, and put it in the back lot till you get that piece. Then you're going to go put it on there. So you got to touch the vehicle two or three times. When that happens, and it happens, this is nothing unique. This happens every time you have this big surge in manufacturing and order activity. So it does cramp the supply. It does slow down the deliveries. I've got numbers of what my Q4 should be, but I'm not going to guarantee them because some of it could get delayed into Q1. So I think that's why we feel pretty good about Q4 and Q1.
Now, I can't tell you much about Q2 because I don't think anybody, no OEM, has much backlog. We all got a little past with the new engine stuff. But remember, we're a dealer, so we're on the tail of the dog. So we're not manufacturing, we're delivering to customers, which typically takes 30 to 90 to 128 days, depending on if it's over the highway or goes into vocational businesses, if it's bodies and things like that. That's why I can fairly confidently say I feel good about Q4 and Q1, Q2 to be known. But remember, we've had six months of backlog, and by the way, it's going down every day because our intake is not going to be super strong.
As it goes down and as we get clarity on emissions and we get clarity on pricing, because there's inflationary pieces inside of this besides engines. It's not all just engines. So OEMs and customers, or dealers, of course, including me, but really, there will be a meeting of the minds on pricing. But when I told you about all those different technologies, on the new stuff, it's really interesting right now because the different technologies, I'm jumping out further than your question, by the way. The different technologies have different cost factors to them, and different OEMs or different positions coming out of tariffs and stuff. It is really a pretty complex game out there right now. I know it's going to get sorted out. As backlogs decrease, we'll get sorted out. Because there is demand out there. I know there's demand for next year.
I've talked to customers. It's just this fog we're in of clarity on emissions and clarity on future pricing, right? But it'll get sorted out here in the next 60 days, and we'll get back to normal. There could be a small blip for my back half of Q1 and something Q2, but it will get sorted out because the demand is there. The age of the fleet is up. Okay? So regardless about growth, the replacement demand is still there going into next year, which is why I think you see ACT's out there. I don't know, they're up like, I don't know if it's 10% or something. I don't have it in front of me right now, but it is up 8%, 10%. Subject to change, of course.
Because we'll start the year off, in my mind, with a better Q1, because that's deliveries, than what we did last year. I know I'm going past your question, but yes, back to your question, it will get stretched out due to supply constraints. They will get built. In my mind, I don't see anything that's going to blow it all up. But you're also fighting the law, which basically means the engine has to get built prior to December 31 if you're using old technology. Or should I say, I think it goes down to you have to set the crank in the block. That's how it really reads. But you will build old engines into January. Okay? I think there's a 5% piece that the government put in their decree. I know I'm getting too deep, but, we will build old engines into January.
So if you look at it, there's still another, what? Little less than three months of building old engines, right? But the supply piece to your first question is going to stretch it out a little bit, right? Which I'm fine with. Let's just get it all delivered. I don't look for anybody to not take their equipment. Okay? The demand is there. It's just a matter of getting it all built, which just stretches out. It's just a timing issue on that piece of it.
Thank you very much for this comprehensive answer. Appreciate it.
You betcha. Probably may be confusing even if it's comprehensive.
Thank you. Our next question comes from the line of Brady Lierz of Stephens. Your line is now open.
Great. Thanks. Good morning, Rusty.
Good morning.
Thanks for taking our questions. Parts and service revenue growth was really strong this quarter. Can you just talk about some of the drivers of that growth? Was that mostly your larger over-the-road accounts? Are you also seeing strength from your smaller, unassigned accounts, too? How sustainable do you think this growth is into 2027?
Well, first, I do believe it is sustainable. I do not look for it to be dramatic, but it is nice to be even gradual good growth. I would tell you national account growth was there, but also smaller accounts did not decline as dramatically as they have been the last couple of years. They were starting to flatten out a little bit, which is nice to see. That means you are starting to get to the bottom of that piece of your business because that is typically your more profitable piece. From a mix perspective, what growth we had was more in the national account piece. It maybe was not as strong as it had been, but it was there.
I could tell you at the end of the quarter, the two, we measure things in per day, how much gross profit per day we produce in all our shops. August and September, August being the best month of the year and September being the second-best month of the year from a per-day average. That was encouraging, right? We will see. Remember, though, in Q4, we do have seasonality. We do have holidays. Q4 is always the toughest, especially November and December, as we roll into it, just because there is less working days, right? We have basically three less working days, right? And a working day to us is worth 3+ million dollars a day in gross profits. We will be battling back in Q4. We always do.
Some years it is two, this year it is three, the way we look at it, when you strip out the holidays. When you put the figures of the holidays in. That will be a seasonality battle, but that is every year. What you are really hoping for is, like you said, underlying good, strong growth, understanding seasonality. That happens every year, right? No, that underlying growth is strong and solid, and for right now, it appears to be that way. Also, we are helped by the delivery of vehicles. Anytime we are delivering more new vehicles, some of the work, there is work, especially in our vocational businesses, where we add equipment or get them prepared, pre-deliver them, add stuff, sticker them, even on our over-the-road business, right?
There is still a little bit that goes with it, of upfitting that we do to get trucks ready to go to the end user. That is always helpful too. It looks like we will still maintain that with a gradually improving customer base and more trucks to deliver, which will help create more gross profit from that perspective for parts and service.
That all makes sense. Thanks for all the detail there. Maybe just lastly on used truck sales. They stepped up nicely in the third quarter. How are you thinking about used truck sales, especially, just going back to Andrew's question earlier about the regulatory uncertainty. Are you seeing any tailwinds to used truck sales from that? Or just any thoughts into 2027?
Sure. Yeah. Without question, we're seeing used is solid, right? We're managing our inventory as well. We're actually, I think because the used market's been a little better, some customers are disposing of more of their selves, and we're not taking as large a fleet trade packages as we have in the past. When it's bad, they always want you to take them, right? When it's good, they like to sell them themselves. Not all the time, but you see that trend inside of it. We're going to maintain solid used truck results, I believe. Steady as it goes, should I say. Stable, no big. Sometimes used is the one thing in the world that'll bite you. But I don't see any bites on us coming in the future for the next few quarters, and I believe it'll still be solid next year.
Just remember, with these new truck pricing going, what's fixing to happen, you're just increasing the spread. That helps used trucks maintain value when new truck prices go up. We're still not anywhere close to back to the percentages that we were, oh, three or four or five years ago. Because new truck prices have shot up 30%, 40% in the last five or six years, and used truck values haven't. So percentage-wise, we're still way under. If you go back historical, go to the last decade or other decades, we're percentage-wise still bigger gap than ever. So I don't see any big hit in used coming right now, my friend. I expect them to stay good and strong.
I'm not going to sit here and say, I know I've read where some folks, big rental leasing companies, "Oh, they're going to be up 10% next year, like for like." I'm not going to say that. But I can see them up a little bit and make this strong, and good and solid, in my mind. But let's see. If some of these technologies didn't work out as well in its aftertreatment, there's more to it than just the aftertreatment. There's been some hardware changes inside some of these engines, that are going to come out. If you had something like that happen, you could see your truck value shoot up, okay? But I'm not here to predict that or say that. So my point being, they should hold it and be good, and we should have good, strong, steady as it goes.
If we've got any issue, it's getting used trucks right now, okay? We've got buyers out there who are buying used trucks besides trading for used trucks, too. So if there's any issue right now, like I said, it's just having the right good enough inventory. But we're managing it well. There's been times in my life we've had, when you're in a different position, so I feel pretty good about where we're at.
That's all very helpful. Thanks again for the time this morning, Rusty. I'll pass it along.
Always. Thank you, sir.
Thank you. Our next question comes from the line of Cole Couzens of Wolfe Research. Your line is now open.
Hey, guys. It sounds like outside of EPA uncertainty, you believe demand is still pretty strong.
Yes.
Coming out of ATA, what gives you the confidence that this order lull is temporary heading into 2027?
What gave it to me? Because people still said they had demand. Now, remember, they're taking a lot of trucks. Besides all the diversity in people's choices of technology, which drives different pricing from the OEMs, besides all that, they're taking a lot of trucks right now, and they know that customers know, and I'm always wide open about everything. Customers know that they don't have a backlog next year, so they're going to push back on pricing for a bit, but they're taking all these trucks in the back half of the year. We're building at an extremely high rate right now. We really are. Well, those trucks have to be in-service, which means they have to in-service other trucks if they're replacement. So they have to take trucks out of service, put trucks in-service, and that takes a little time for them too.
It's not like going to the races, jumping out of one truck, car or truck, into the next one. There's a little more to it than that, because you got to get the other truck ready for disposal, which means you got to fix it up. The used truck, the new truck, needs to be ready to go on the road. So that takes them a little time. I know that people said they have strong demand, but they're not going to be in a really big hurry. I don't see that. I'm not saying that's built, that's just not what I see. I talked to a lot of people. Right up front, I'm sure that as we get closer to that timeframe. Look, this industry, at times, I've seen this industry have three or four weeks of real true backlog in it before.
So in the just-in-time world we've created over the last decades, many few decades, people can ramp up and get ready and deliver pretty quick. So I think as they roll all this in, they still have a lot to buy next year. I saw some CapEx budgets that were talked about. It just may not be smooth as you go because of these other issues. So that's what gives me the confidence. Plus, I look at the age of the fleet, and it's up higher. I talk to people that their fleet, if they want it X, it's X. It's up almost a year higher than what they like. Which that leads to higher maintenance in there that they're paying, right? And unless, not as reliable. Less reliability, the older your fleet is. So it's there, and they're slowly, even though we. Remember, I believe there's legs.
I am talking about the over-the-road business. I look for vocational to be good next year, if not better than this year. It has been steady as it goes. But the over-the-road is still 70% of what is going on. While we know what happened going back to last January, spot rates shot up 30%, 35%. At one time, they peaked at around 50% up year-over-year, and they have leveled back down in the 30s range year-over-year. But people started rolling their contract rates. People that have more dedicated stuff, it takes longer to roll it in if you are not employed or if you got more dedicated. It depends on who you are talking about. But I still believe, and the real constraint of what drivers and things like that, it was supply side. It was not demand freight side driven. It was supply.
I do think the economy still seems to be I cannot believe how well the economy has weathered all this crap. The war in Iran, the fuel prices and everything else, but the economy continues to show through somehow. So I do believe still we are eventually going to get some demand to help drive it. Right now, if you remember a year ago, the government was cracking down on non-compliant drivers and this and that, all these supply side things. So all this has been driven by supply side. I still think there is going to be some legs for some demand, okay, coming next year, just my novice opinion. So, you add that in. Folks have not been really able to grow a lot because there is a lot of driver cost.
As you are seeing some of the releases, they are better than what they were, but there is still a lot of cost, right? Even though they are getting better freight rates, they are spending a lot of it. Most people are up 10% in driver pay, right? Plus the other cost of the equipment and things like that. So it keeps pressure on the supply side, but I believe demand is coming and people wanted vehicles. It is just a matter of we are taking a lot right now. I need to get clarity on pricing and technology, and I am going to buy a lot of trucks, okay? Because I need to. It is as simple as that, even though I do not make it a simple answer.
No, that is super helpful, Rusty. I guess maybe just a question on margins. You guys had strong revenue growth in both commercial vehicle and aftermarket sales, but margins are still down year-over-year.
Yep.
I'm assuming there's some mix headwinds in there, but can you expand on what's driving that?
I would tell you, look, margins this quarter from a truck perspective were 0.1 less than two of the last three quarters. To me, they were kind of flat. I hear you. They were a hair higher. They were in the eights still. It was 8.1, and at one time it was 8.5 back a year ago or so. Really and truly, it's a mix. We're getting more fleet business. The small guy comes in always a little later. I'm hoping and expecting to maybe start seeing some improvement. I think our mix is going to get a little better as I look at it going into Q4. I got to make sure what gets delivered on time and what doesn't. I don't see margins getting any less, for sure.
I see there's some upside to truck margins in my mind, in the next couple quarters. When it comes to aftermarket, our parts business grew better than our service business. Your service margins are well more than double what your parts margins are, right? I think we're only off one quarter-over-quarter. We were off one. We weren't as good as we were a year ago, that's for sure. We're 100 basis points or more, or we're a percent off, but pretty similar to where we have been. It's mainly a mixed perspective with better growth in parts than we have in service. That would be my best answer. Again, also on that, remember, when I said earlier, I said my growth was in the national account fleet business. That's not as good a margin as a small person, right?
Again, it's more of a mixed thing. I for sure believe we can get it back. But I'll take it. Like I told somebody the other day, they said, "Well, gosh, why would I want to grow that?" Because if the small guys were hurting worse, I got to get growth somewhere. But it might come at a little bit less margin, right? That's really what it's about. It's a parts and service mix, and it's a customer mix kind of thing. But when the small guy comes back, you'll see those margins get back up.
That's helpful. Just one quick follow-up on the supplier delays. Where is the actual bottleneck? Is the expectation that that should start to abate as we enter 2027? Or do you see this being
Yeah.
When does this end?
Well, that all depends on demand, okay? The bottleneck is across the board, as I said, in tier 2 and tier 3, that these OEMs have well more, 1,000+ trucks that are all really built except for two little parts or something, right? They're parked out back. So that bottleneck, it's across the board. It's not one particular thing. There's only one tier 1 thing that I've seen in the last few weeks, and I think people are trying to work their way through it, and I'm not going to get specific about that. So those little things will get Unless we get some orders, it'll be no problem come February. All right? But I do expect us to start getting But that's still a ways off. Because as I said, I walked through, our customers are not in a big hurry to take Q1 trucks.
They're in servicing all these trucks. I know people that some people, their orders, 50% of what they bought this year are coming in Q4. Well, that means they're going to in-service through Q1, and they'll buy and get trucks on delivery for Q2. That'll happen. But that's still a ways off, okay? With all the uncertainties I talked about, "I got time," they'll tell themselves. Because I know the OEMs don't have any big backlogs next year. Now, they better be careful. I would tell a customer that. I do expect acceleration. I can give you reasons why you shouldn't hold off, but it's not my money to spend, it's theirs. But you got to be careful, because I do think when it hits, it's going to hit hard, fast, and big. Right? I think when orders pick back up, they're going to pick back up quickly, okay?
Because some people are not going to want to miss, and have what happened the back half of this year, where not everybody got everything they wanted the back half of this year, especially your smaller customers. It will happen. It is just a timing thing. I have confidence it will happen. The people's needs, as someone asked me a minute ago, was there a lot of orders given out at ATA? Not that I am aware of. I do know there was a lot of talk, a lot of talk about demand that is needed, demand out there. There is time in their mind because they got so much coming in this back half part of this year to in-service. It could be a slight little bubble as we transition to new technology, but it is not going to be a big one, and it will not last long.
I have confidence in that.
Thanks, Rusty. I will turn it back.
You bet.
Thank you. Our next question comes from the line of Avi Jaroslawicz of UBS.
Hey, thank you. Good morning.
Good morning.
So just in trying to think about what Q1 could look like. It sounds like as long as the engine is produced, even for the most part by December 31st, it is not going to get an NCP in 2027. So it sounds like some of the supply bottlenecks are kind of downstream of engines. Are you thinking that the OEMs are just going to stock up on as many engines as possible? And what do you think the spillover into Q1 could look like?
Well, if they could, they would. But there are regulations as to how they can do that. I can remember in the old days when they would have warehouses full. We're a little more sophisticated than 40 years ago, okay? It's a little harder to do in the world we live in now. Manufacturers would stack them up big, right? But remember, they don't operate. First, let's go back. They don't operate that way. Everything's just in time. People don't operate like they used to. They don't have warehouses of parts and stuff when the manufacturers don't. But there is, I think, a 5% carry rule. It's just a matter if they can get them built. I'm not sure. I don't want to speak for everybody where they are, but I expect everybody to build into January.
I don't know if that's three weeks, two weeks, four weeks, probably three or four weeks into January, if they can get the engines. And I can't answer that question because I said the old rule, and I think it still is crank's got to be laid in the engine by December 31. That made totally complete, but the crank's got to be in the block. I would imagine OEMs, some for sure, will want to carry as many as they can legally, and that's what they'll do. So, that would tell you're going to have some already online trucks. And remember, just because the manufacturer builds 200 trucks a day, he's probably got 1,000 trucks going through there, right? They don't build them in one day or more. So you got all that going through. There's a week plus that's already in the factory.
Then you got a 5% carry. So that gets you, what's a month? 8% or something, do 12, 8.5%. So that gets you close to about three to four weeks of build into January. And I would imagine that would be the goal of most of the manufacturers. You'll have to ask them. That's their business, but that'd be my guess. So, that gets you three or four weeks of January, and then we're either going to go to NCPs. And by the way, if you're a customer, or you're going to just pay an NCP plus whatever for your model and inflation. And that's the part that's being negotiated out right now. Okay? So, you know what the NCP is. We know costs have risen. So just finding that little piece.
That's why I don't see, especially for folks that are going to be using NCPs, I do not see a big stoppage or some big block in the road to get it done. There could be a little something, but it'll come to a cost factor. But it's real simple to figure out, because the NCP is what the NCP is. The only problem is we're working off a draft, okay? And you got to hope it stays the same, so it does get a little confusing there. So again, but remember, we're on the tail of a dog. So I expect us to have a solid Q1, but I need to wait and see what gets built and delivered in the fourth quarter because of all this tier supply issues, right? So I don't have clarity as to exactly how everything falls out.
I feel pretty good about both quarters. I am just not sure. I feel good about Q4. I feel decent and good about Q1. Q2, I will have to get to, but we got time. As they sort out all these issues I keep repeating myself about and talking about, I think everybody should understand them right now. That is where we are at. That is truly where we are at. I am not going to try to quantify it, because I do not know about shortages and things, if stuff gets delayed a couple weeks here or there, and where it goes. Does it go into vocational? Does it go here? Does it go there? It will all be all right.
Okay. Appreciate that. It sounds like if they can keep building another three-four weeks into January, then that could take retail sales into pretty much through February.
Pretty much from fourth quarter. That takes you pretty much through Q1. Okay?
Okay.
Then there-
Got you.
I got some uncertainty in Q2, but I've still got plenty of time, okay, because we've got to sort out the pricing and technology here real quick. We'll get that sorted out in the next 60 days, I'm confident, okay?
Got you. On this pricing side.
The demand's there. I'm telling you, there's going to be demand. I believe there will be demand. I don't look for demand to go away. It's just got these uncertainties, man. It'll get itself sorted out. It always does.
All right. On this pricing dynamic, if I'm understanding correctly, it sounds like the OEMs underlying core pricing to cover costs and whatnot, is that somewhat dependent on what the final NCP is going to look like? Isn't there a thing of it as like a maximum price that can be absorbed for next year, and it's just a question of whether part of that goes to their margins or is just passed through?
Well, from what I hear, look, we know that we've had some inflation, more than the Feds want, right? Well, it happens in the truck business, truck world, too, manufacturers. They've been absorbing. You can see margins and stuff. It's not hard to go find them. Even the Europeans have spun off their truck divisions. It's real easy to go find what truck margins are. So I expect manufacturers, I think, are not trying to be anything like gouging or anything. They're trying to recover some costs, plus NCP. Or if you're doing new technology, who knows what it costs, okay? Only you do. But if you're going down the NCP route to begin with, which both of my manufacturers are, you're going to just have to bet on the draft, and then it's trying to recover the inflationary pressures you've had, right, and cover your increased cost.
That gets you to the number you're supposed to be at, and that's where we will get to, okay? It just takes a little time and validation of what those costs really are outside of NCPs. When everybody gets comfortable, I'm not going to get into the numbers and stuff with it. I really don't want to. But at the same time, it's pretty simple. If you got an NCP, it's NCP plus recovering what your increased costs are. I don't think people are looking for big margins going into the year to begin with. It's not like, you know you're going to have demand, but you don't have it now, so you need to go build a backlog. Then you can work on it in the back half of the backlog.
But right now, people did work on the back half of the backlog this year, I can tell you, but that was back in June and July when they were building it. Okay? That will eventually happen again when we get the demand back for the new technology and the new pricing and stuff. Upfront, manufacturers will be just trying to recover if they went down NCP, whatever the NCP is, plus their increased cost. In fact, that's what I'm seeing out there. It's just that, again, customers aren't in a big hurry. You try to get them in a bigger hurry, they're not. They're taking so many trucks. I've gone over and over this right now, and that's my take on it. Hell, I could be wrong, but I don't think I am. So on where we're at. We're just in this little space right now.
I expect everything to sort itself out in the next 60 days, is all I can tell you.
All right. I just want to circle back on the parts and service business. We were hearing over the last couple of months that some of the spike in operating costs put some pressure on demand there, just with some strain on budgets. It does not look like that was something that showed up in your numbers in Q3. Do you think that was a factor in the quarter for your business? Or we could have seen a stronger improvement had the costs, fuel and driver costs not spiked as they had? Or is this maybe an unrestrained kind of quarter?
Yeah, I would tell you, we feel it. One of the things when I said margins are not as high as they were, say, a year ago. They are in line where they were the last quarter or two, real close. Part of that was mix, and part of it was competitive pressures to your comment, right? People were still really tight, especially the smaller guys that may not get all their fuel surcharges. They were having to spend more money on fuel, right? So they were having to watch their maintenance and their repair budgets a lot tighter.
Same thing we have been dealing with for three years in the freight recession, then you get all this fuel spike, and it adds more pressure into it. It is not just one thing, but yes, we know all the costs are up. You can see it inside the earnings releases, okay?
That is going to put pressure on all expenditures, right? Especially as you get to the end of the year and people been out a lot of their budget, you start seeing it here in Q4 sometimes. But I am proud of the team. We went out there, as I said, we continued to grow our national account business with a little less margin. Yeah. But it still helps support the overall of what we are trying to accomplish. As I said, August was the best month we had. When you look at it the way we do, like measuring almost by the hour, by the day. September was the second-best month we had. So those were encouraging signs, right? So I think there is still underlying opportunity out there for us. Like, I know there is, okay? All we did was sort of bottom out. We were really flat.
Really were flat over a few months. Last year, end of this year, it was really flat. We saw some increased demand in August and September. I am not really wanting to put a number on October yet. We got a big week here to get it all figured out. I feel good that it will be gradually sustainable, right? At the same time, we are going to continue to look for M&A, I will tell you that right now. Nothing big, but lots. Maybe you put a lot of blunt singles together out there. Back to your real question. The mix was one thing. It is there. Cost pressures put pressure on margins, right? Because everybody is out there in the marketplace going after it. So it is a lot of things, right? Guess what? We performed.
In my mind, we performed as well as anybody in this environment that we were in. Still on the parts and service side. I am scrapping the truck side all the way from parts and service side. So we have been performing and continuing to perform. We are looking to do that a little maybe next year, finally get some growth tailwinds in that.
Last couple of years, it has been really difficult, but we are feeling good about the opportunity to grow our parts and service business sequentially better than we have the last couple of years. I am not talking about just straight up growth. I am talking about good, solid, gradual. Now, we got to define what gradual is. Hopefully in the mid-singles would be nice, is what we would like to see next year from a same-store perspective, and I would be okay with that. If it is going like that direction.
I am not looking for double digit parts and service same-store growth. I am looking for mid-singles, maybe upper. We will have to see, depending on the territory, which area it is in the country. Overall, I feel good about underlying demand across the board going into next year. Not where we are at now. Where we are at in parts and service feels decent. Truck may have a little bubble. It is going to be really good in Q4 and Q1, and we will sort through these uncertainties, and I feel good about the whole year as a whole. It will not be straight line. It never is a straight line.
All right. Appreciate the perspective. Thanks for the time.
You got it.
Thank you. This concludes the Q&A session. I would now like to turn it back to Rusty Rush for closing remarks.
Well, folks, I appreciate your participation and your listening. This is the longest gap I have between calls because it will be middle of February before we talk again. In closing, I would like to wish everybody a happy Thanksgiving, a Merry Christmas, a Happy New Year, and just overall, a very happy holidays this year. So enjoy your families, and we will look forward to talking to everybody in mid-February. Thank you very much.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.