Dycom Industries (DY) Up 7.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Dycom Industries (DY). Shares have added about 7.1% 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 drivers.
Dycom's Q1 Earnings & Revenues Beat Estimates, Increase Y/Y
Dycom Industries reported solid results for first-quarter fiscal 2024 (ended Apr 29, 2023). The top and bottom lines surpassed their respective Zacks Consensus Estimate and increased on a year-over-year basis. The upside was mainly backed by solid organic growth of the top five customers.
Earnings & Revenue Discussion
Dycom’s adjusted earnings of $1.73 per share surpassed the Zacks Consensus Estimate of 70 cents by 147.1%. The quarterly earnings increased from the year-ago adjusted figure of 51 cents per share. The uptrend was driven by higher adjusted EBITDA, lower amortization and higher gains on asset sales, partially offset by higher depreciation, stock-based compensation, interest expenses and taxes.
Contract revenues of $1,045 million increased 19.3% year over year (all organic) and topped the consensus mark of $940 million by 11.2%. With the deployment of gigabit wireline networks, wireless/wireline converged networks and wireless networks, the company witnessed an increase in demand from four of its top five customers.
The company’s top five customers represented 65.5% of total contract revenues, which rose 20.7% organically. Revenues from all other customers increased 16.7% organically in the quarter. The quarter marks the 17th consecutive period of organic growth for DY’s all other customers in aggregate, excluding the top five.
Dycom’s largest customer AT&T contributed 21.5% to total revenues. Lumen (the second-largest customer) contributed 13% to total revenues and grew 70.4% organically. This marks the fifth consecutive quarter of organic growth with Lumen. Comcast contributed 11.5% (up 8.4%), while Frontier and Verizon represented 9.9% and 9.6% of total revenues, respectively. Frontier and Verizon rose 80.2% and 23.4% organically, respectively.
Fiber construction revenues from electric utilities increased 20% year over year, organically, and contributed 8% to total contract revenues in the quarter.
Dycom’s backlog at the end of the fiscal first quarter totaled $6.316 billion compared with $6.141 billion at the fourth quarter of fiscal 2023-end. Of the backlog, $3.482 billion is projected to be completed in the next 12 months.
Operating Highlights
Depreciation and amortization expenses of $37.3 million were up 1.7% year over year. General and administrative expenses of $82.4 million increased 18.7% year over year.
Adjusted EBITDA was $113.5 million during the quarter, up 78.2% year over year. Adjusted EBITDA margin of 10.9% expanded 360 basis points (bps) from the year-ago level.
Financials
As of Apr 29, 2023, Dycom had liquidity of $673.9 million, including cash and cash equivalents worth $71.4 million (compared with $224.2 million on Jan 28, 2023). Long-term debt was $803.4 million at the fiscal first-quarter end, down from $807.4 million at the fiscal 2023-end.
Fiscal Q2 2024 Guidance
For the fiscal second quarter (ending Jul 29, 2023), management expects contract revenues to grow in mid-single digits from the year-ago reported figure. The adjusted EBITDA margin is expected to increase 50-100 bps from the year-ago level. For the period, Dycom expects the effective tax rate to be 26% and diluted shares of 29.7 million. Interest expense is likely to be $12.2 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted -6.34% due to these changes.
VGM Scores
At this time, Dycom Industries has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Dycom Industries has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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