Dycom Downgraded to Strong Sell

Zacks

Zacks Investment Research downgraded Dycom Industries Inc. (DY) to a Zacks Rank #5 (Strong Sell) on Mar 1, 2014.

Why the Downgrade?

Dycom witnessed downward estimate revisions after reporting disappointing second-quarter 2014 results. Out of the 7 analysts covering the stock, 1 and 3 have lowered their estimates for the current and the next quarter respectively in the last 7 days, while 2 and 4 analysts have lowered their estimates for fiscal 2014 and fiscal 2015, respectively. 

Moreover, in the last 30 days all 7 estimates were revised downward for the current quarter, next quarter and fiscal 2014. This sharp decline in estimates was seen after the company announced its preliminary guidance, whereby it mentioned that the bad weather is expected to affect its third quarter, in addition to the second quarter.

Therefore, the company trimmed its outlook for the same. It now expects total revenue for the third quarter of fiscal 2014 to be flat year over year. Earlier, Dycom expected revenues for the third quarter to be in the mid-single-digit range.

On Feb 26, Dycom Industries reported second-quarter (ended Jan 26) fiscal 2014 net loss of $3.1 million or 9 cents per share, in line with the Zacks Consensus Estimate. In the prior-year quarter, the company had reported net income of $5.2 million or 15 cents per share.

Dycom’s performance has been impacted by severe weather conditions in the latter half of second-quarter 2014. Heavy snowfall and the exceptionally cold temperature resulted in lower number of available workdays, which weighed on both productivity and margins.

However, the company’s revenues picked up 5.7% year over year to $390.5 million and there was organic growth of 0.9%. However, revenues fell short of the Zacks Consensus Estimate of $395 million. Despite the headwinds, Dycom’s revenues benefited mainly from its strong portfolio of customers, primarily in the telecom and wireless equipment industries.   

The Zacks Consensus Estimate for the current quarter and the next quarter of fiscal 2014 remained stagnant at 22 cents and 50 cents respectively, in the last 7 days. For 2015, the Zacks Consensus Estimate plummeted 3.8% to $1.78 per share.

However, in the last 30 days, the Zacks consensus Estimates sank as much as 31.3%, 5.7% and 19.7% respectively for the current quarter, next quarter and fiscal 2014. For fiscal 2015, the Zacks Consensus Estimate contracted 5.3% to $1.78 a share.

Not all specialty contracting service providers are performing as poorly as Dycom. Some better-ranked companies in the industry that sport a Zacks Rank #2 (Buy) include Quanta Services Inc. (PWR), AECOM Technology Corp. (ACM) and Altra Holding Inc. (AIMC).

Read the Full Research Report on DY
Read the Full Research Report on ACM
Read the Full Research Report on PWR
Read the Full Research Report on AIMC


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