Dycom (DY) Down 1.4% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Dycom Industries, Inc. DY. Shares have lost about 1.4% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is DY due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Dycom Q2 Earnings Beat, Enjoys Robust Industry Trends
Dycom continued its winning streak for the eighth consecutive quarter as its second-quarter fiscal 2018 adjusted earnings of 12 cents per share surpassed the Zacks Consensus Estimate by 9.1%. The bottom line also came in at the higher end of the recently projected range of 9-12 cents.
However, earnings were substantially lower than the year-ago tally of 82 cents.
About a fortnight ago, the company had lowered its outlook for fiscal second-quarter results on account of reduction in number of available workdays due to adverse weather conditions, which had a negative impact on productivity and margins during the quarter. Also, the company adjusted its fiscal year end from the last Saturday of July to the last Saturday of January, resulting in the commencement of fiscal 2019 on Jan 28, 2018.
Inside the Headlines
Dycom’s fiscal second-quarter contract revenues came in at $655.1 million, down 6.6% year over year. The top line matched the Zacks Consensus Estimate and also came within the company’s expected range of $645-$675 million.
Increase in demand for deployment of 1-gigabit wireline networks and wireless/wireline converged networks by two major customers fuelled top-line growth during the quarter. This was, however, more than offset by a near-term moderation in spending by an important customer. Organic revenues contracted 10.6% year over year.
The company reported non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $59.6 million for the quarter compared with $86.2 million a year ago. Difficult winter weather conditions and the costs related to initiations of large customer programs hurt profits.
Liquidity
As of Jan 27, 2018, Dycom had cash and cash equivalents of $84 million compared with $38.6 million as of Jul 29, 2017. The company’s long-term debt was $733.8 million at the quarter-end compared with $738.3 million on Jul 29, 2017.
Guidance
Dycom reiterated its guidance for fiscal 2019 and also updated its outlook for the current quarter. For fiscal 2019, the company anticipates revenues to be in the range of $3.30 to $3.50 billion, with earnings per share of $5.22-$6.14. For first-quarter fiscal 2019 (ending on Apr 28, 2018), the company expects adjusted earnings per share in the band 63-78 cents, projecting revenues to lie between $720 million and $750 million.
The company expects revenues in the fiscal second quarter to stabilize and also projects strong demand from several heavyweight customers. Dycom is optimistic about fiber deep cable capacity projects, 1 gigabit deployments and initial phases of fiber deployments for newly emerging wireless technologies. However, the company’s margins will likely suffer due to timing volatility, customer spending modulations and an adverse mix of work activities.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.
Dycom Industries, Inc. Price and Consensus
Dycom Industries, Inc. Price and Consensus | Dycom Industries, Inc. Quote
VGM Scores
At this time, DY has a poor Growth Score of F, however its Momentum is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, DY has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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