Daseke (DSKE -1.67%) stock shot up in early trading Tuesday and rallied higher through the session, up by about 12% at 3:27 p.m. EDT.
Don't feel bad if you haven't heard of Daseke before -- the small-cap company is barely mentioned within the analyst and investor community, even though it's the largest flatbed and open-deck transportation and logistics carrier in North America, with a fleet of more than 4,500 tractors and 11,000 flatbed and specialized trailers. Another interesting fact about Daseke is that it went public in 2017 by merging with a special purpose acquisition company (SPAC).
If that surprises you, wait until you hear this: Tuesday morning, Daseke reported record numbers for its second quarter and upgraded its outlook for the full year.
Here are some key figures from Daseke's second-quarter report:
- Revenue: Up 14.9% to $404 million.
- Net income: Up 2,106% (yes, you read that right) to $35.3 million.
- Adjusted net income: Up 200% to $30.2 million.
The company primarily generates revenue by hauling freight using both its own equipment as well as owner-operator equipment. It also earns some revenue for brokerage and logistics services, as well as fuel surcharge that it receives from customers. Here's a glimpse of how these performed in Q2:
- Company freight: Revenue down 2%.
- Owner-operator freight: Revenue up 34.5%.
- Brokerage: Revenue up 15.2%.
- Logistics: Revenue up 21.6%.
- Fuel surcharge: Revenue up 54%.
As the U.S. economy's reopening has spurred a boom in manufacturing and infrastructure activity, Daseke has witnessed strong freight volumes and rates in key end markets like construction machinery, steel, and metals, which helped offset weakness in other markets.
Daseke also reduced its total debt by 12.5% to $594.4 million and generated free cash flow of $32.3 million during the quarter.
Tuesday was important for Daseke for another big reason: It appointed Jonathan Shepko as its new CEO. Shepko has been serving as interim CEO since January, and has been on the company's board of directors since it went public in 2017.
"Our ability to deliver several consecutive quarters of solid financial results, our record outperformance of this second quarter 2021 and the increase in our 2021 financial outlook each demonstrates the momentum and success of our strategy," Shepko said in the company's earnings release.
Encouraged by its strong second-quarter performance and the resilient industrial and freight markets, Daseke now expects to generate revenue in the $1.5 billion to $1.6 billion range in 2021. That represents flat to roughly 7% growth over 2020. Notably, Daseke had previously expected to report lower revenues for 2021 due to the impact of some oil transportation assets that it divested itself of last year.
Importantly, Daseke upgraded its revenue outlook while keeping its capital expenditure budget intact, which means it could earn higher-than-expected FCF. That's something worth watching.