Descartes Earnings: Positive Demand Trends Continue, Leading to More Quarterly Strength

Descartes reported strong second-quarter results, with revenue and adjusted EBITDA easily topping our estimates. Demand indicators are positive and consistent with recent quarters. GroundCloud integration efforts are underway and seem to be off to a good start in terms of overall margin performance for the company. While the company made no acquisitions this quarter, management is optimistic on the deal-making front, which we think should help drive growth through fiscal 2025. Management was cautious in its outlook, which is not unusual. Our opinion that the continued evolution of the supply chain toward more complexity and more exogenous shocks benefits Descartes and helps attract more customers to their network remains unchanged. Based on strong results, we modestly increased our near-term estimates for both growth and margins. As a result, we raise our fair value estimate to $74 (CAD 101) per share, from $72 (CAD 98) previously, and view the shares as fairly valued.