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Dycom Industries (DY) Up 10.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·4 min read

A month has gone by since the last earnings report for Dycom Industries (DY). Shares have added about 10.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Dycom Industries due for a pullback? 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 catalysts.

Dycom Q1 Earnings & Guidance Beat, Pulls Q2 Outlook
    
Dycom Industries Inc. reported impressive earnings results for first-quarter fiscal 2021 (ended Apr 25, 2020). Notably, both the top and the bottom line of the company surpassed its projections despite a challenging economic backdrop.

Given the significant uncertainties stemming from the COVID-19, the company refrained from providing any guidance for the fiscal second quarter as well as the subsequent quarters. Nonetheless, it expects the ongoing quarter’s adjusted EBITDA growth to be consistent with the year-ago reported figure on the back of stable demand for its services.

During the quarter, Dycom reported adjusted earnings of 36 cents per share. The Zacks Consensus Estimate was of a loss of 4 cents per share. However, the metric fell 32.1% from the year-ago quarter’s earnings. Nonetheless, the bottom line substantially came ahead of the company’s guided range of a loss of 9 cents to earnings of 8 cents per share. Dycom has been facing issues regarding a large customer program while a slow start at a specific customer’s rollout of its new system weighed on its earnings performance.

Revenue & Operating Highlights

Contract revenues of $814.3 million dipped 2.3% year over year but surpassed the consensus mark of $738.7 million by 10.2%. Notably, the reported figure exceeded the company’s forecast of $730-$780 million.

Organically, revenues (excluding storm restoration services of $4.7 million in the year-ago quarter) slid 1.8% year over year. The company witnessed increased demand from the two of its top five customers owing to the deployment of 1-gigabit wireline networks, wireless/wireline converged networks and wireless networks.

The company’s top five customers contributed 78.5% to total contract revenues, decreasing 3.9% organically. Dycom’s largest customer Verizon accounted for 21.6% of the total revenues. While AT&T (second-largest customer) reflected 18.9% of revenues, CenturyLink added 18.3% to total revenues, surging 40.8% on organic basis. Comcast accounted for 14.5% while Windstream — representing 5.2% of the total revenues — climbed 26.1% organically. Revenues from all other customers grew 7% organically in the quarter.

Dycom’s backlog at the end of the reported quarter totaled $6.442 billion comparing unfavorably with $7.314 billion at fiscal 2020-end and $7.051 billion in the year-ago comparable quarter. This downside was due to the customers’ reprioritization of the components of a large program. Of the backlog, $2.512 billion is projected to be completed in the next 12 months.

Gross margin during the quarter was 16.5%, up 80 basis points (bps) from the predicted level. Adjusted G&A expense, as a percentage of contract revenues, declined 18 bps from the prior-year number. Adjusted EBITDA margin of 8.6% contracted 20 bps from the year-ago level.

Financials

As of Apr 25, 2020, Dycom had cash and cash equivalents worth $643.9 million compared with $54.6 million on Jan 25, 2020. Borrowings under its revolving line of credit were $675 million in the quarter. Long-term debt was $1.36 billion at the end of the reported quarter compared with $844.4 million at fiscal 2020-end.

Fiscal 2021 View

For the full fiscal, the company anticipates capital expenditures, net of disposal proceeds, within $60-$70 million, a reduction of $60 million from its prior guidance.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted 11.86% due to these changes.

VGM Scores

At this time, Dycom Industries has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Dycom Industries has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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