What To Expect From Logistics Business Solution Provider Descartes Q2 Earning Next Week?

The Descartes Systems Group Inc DSGX is scheduled to report Q2 FY24 earnings on Wednesday, September 6, 2023.

RBC Capital Markets writes that Descartes' shares have been rangebound for the last two years as organic growth decelerated from highs during COVID-19. 

The analysts expect Q2 to match consensus and anticipate that the Q3 baseline is likely to show that organic growth is stabilizing in the mid-single-digit range.

The analysts Paul Treiber, John Shuter, and Michael Moriyama forecast Q2 revenue up 14% Y/Y to $141 million compared to consensus of $140 million. 

They see an adjusted EBITDA of $60 million, matching consensus, with growth (11% Y/Y) in line with Descartes' long-term target (10-15% per annum). 

The analysts forecast organic growth to slow from 7.0% Q1 to 5.5% Q2, stabilizing at 5.0-5.5% going forward. The projection relies on the following factors:

  • Descartes' historical average organic growth, which stood at 5.6% in FY20 before the COVID-19 pandemic.
  • The growing proportion of Descartes' strategic and faster-growing businesses in its overall portfolio.
  • The ongoing strategic emphasis on the digital transformation of supply chains.
  • A gradual moderation in declines within the freight market.

Stabilizing organic growth may catalyze the stock, which has lagged software and transportation peers YTD. 

RBC sticks to the Outperform rating with a price target of $95.

Price Action: DSGX shares are up 0.86% at $75.61 on the last check Friday.

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