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Dycom (DY) Q2 Earnings Beat, Margins Up Y/Y, Stock Rise

Zacks Equity Research
·4 min read

Dycom Industries Inc. DY reported impressive earnings for second-quarter fiscal 2021 (ended Jul 25, 2020). Notably, the bottom line not only surpassed the Zacks Consensus Estimate but also grew on a year-over-year basis. Shares of the company jumped more than 11% on Aug 26, post the earnings release.

Earnings & Revenue Discussion

Dycom reported adjusted earnings of $1.18 per share, surpassing the Zacks Consensus Estimate of 69 cents by a whopping 71%. Notably, the metric increased 8.3% from the year-ago earnings of $1.09 per share. Dycom experienced broad-based improvement in the services performed despite the complexity of a large customer program. Also, improved operating leverage and lower-than-expected disruptions from the COVID-19 pandemic helped it record higher year-over-year earnings.

Dycom Industries, Inc. Price, Consensus and EPS Surprise

Dycom Industries, Inc. Price, Consensus and EPS Surprise
Dycom Industries, Inc. Price, Consensus and EPS Surprise

Dycom Industries, Inc. price-consensus-eps-surprise-chart | Dycom Industries, Inc. Quote

Contract revenues of $823.9 million dipped 6.8% year over year and missed the consensus mark of $884.2 million by 2%. Organically, revenues fell 6.8% year over year. The company witnessed stable demand despite a challenging economic backdrop. Moreover, it witnessed solid growth from two of the top five customers.

The company’s top five customers contributed 76.6% to total contract revenues, which decreased 9.2% organically. Revenues from all other customers grew 2% organically for the quarter.

Dycom’s largest customer Verizon accounted for 19.8% of the total revenues. While CenturyLink (the second-largest customer) added 19.2% to total revenues, surging 14.2% on an organic basis, AT&T made up 16.3% of revenues. Comcast accounted for 15.9%, while Windstream — representing 5.3% of the total revenues — climbed 25.2% organically.

Dycom’s backlog at the end of the reported quarter totaled $6.441 billion, comparing unfavorably with $7.314 billion at fiscal 2020-end and $6.691 billion in the year-ago comparable period. Of the backlog, $2.455 billion is projected to be completed in the next 12 months.

Operating Highlights

Gross margin for the quarter was 20.1%, up 160 basis points (bps) from the year-ago level. Adjusted EBITDA margin of 12.5% expanded 120 bps from the year-ago level.

Financials

As of Jul 25, 2020, Dycom had cash and cash equivalents worth $22.5 million compared with $54.6 million on Jan 25, 2020. Long-term debt was $665.5 million at the end of the reported quarter compared with $844.4 million at fiscal 2020-end.

Fiscal Third-Quarter 2021 View

For the fiscal third quarter (ended Oct 24, 2020), it expects contract revenues and margins to range from in line to modestly lower sequentially.

Zacks Rank & Peer Releases

Dycom, which shares space with Great Lakes Dredge & Dock Corporation GLDD in the Zacks Building Products - Heavy Construction industry, currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EMCOR Group Inc. EME reported impressive earnings for second-quarter 2020. Adjusted earnings surpassed the Zacks Consensus Estimate, mainly driven by cost discipline amid the COVID-19 pandemic.

MasTec, Inc. MTZ reported impressive results for second-quarter 2020, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. Also, its adjusted earnings exceeded management’s expectation on the back of solid segmental performance (barring Oil and Gas).

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