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Dycom's (DY) Stock Increases on Q4 Earnings Beat, Margins Fall

·5 min read

Dycom Industries Inc. DY reported stellar results in fourth-quarter fiscal 2022 (ended Jan 29, 2022). Quarterly earnings and revenues surpassed the respective Zacks Consensus Estimate and increased on a year-over-year basis. The upside was mainly backed by solid organic growth and storm restoration services.

Shares of the company rallied nearly 7.7% on Mar 2, post the earnings release.

Major industry players have been constructing or upgrading significant wireline networks across broad sections of the country to provision 1 gigabit network speeds to consumers, either directly or wirelessly using 5G technologies, which is broadening the industry as well as Dycom’s opportunities.

Earnings & Revenue Discussion

Dycom reported adjusted earnings of 2 cents per share, surpassing the Zacks Consensus Estimate and the year-ago quarter’s figure of negative 7 cents by a whopping 128.6%.

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 $761.5 million moved up 1.4% year over year and beat the consensus mark by 6.1%. Contract revenues increased 10.1% on an organic basis (after adjusting for storm restoration services revenues and an additional week of operations in the prior-year period). The same from storm restoration services were $5.7 million in the quarter.

Its top five customers contributed 66.6% to total contract revenues, which rose 5.4% organically. Revenues from all other customers increased 20.8% organically in the quarter. The quarter marks the 12th consecutive quarter wherein DY’s all other customers in aggregate, excluding the top five customers, have grown organically.

Dycom’s largest customer AT&T (contributing 26.6% to total revenues) advanced 73.6% on an organic basis. This marked its fourth consecutive quarter of organic growth. Comcast (the second-largest customer) contributed 13.1% to total revenues, Lumen Technologies accounted for 11.7% and Verizon and Frontier represented 10.1% and 5.1% of total revenues, respectively. Frontier rose 97.2% organically. Fiber construction revenues from electric utilities increased 37.2% year over year, organically, and contributed 7.5% to total contract revenues.

Dycom’s backlog at the end of the fiscal fourth quarter totaled $5.822 billion compared with $6.810 billion at fiscal 2021-end. Of the backlog, $3.072 billion is projected to be completed in the next 12 months.

Operating Highlights

The gross margin in the quarter was 13.8%, down 50 basis points (bps) from the year-ago quarter level due to significantly higher COVID-related absences and adverse winter weather conditions. Adjusted EBITDA margin of 5.7% contracted 40 bps from the year-ago level.

Fiscal 2022 Highlights

The company reported total contract revenues of $3.13 billion, down 2.1% from $3.2 billion in fiscal 2021, primarily due to 0.2% organic revenues fall (after adjusting for storm restoration services revenues and an additional week of operations during fiscal 2021). Contract revenues from storm restoration services were $3.9 million, down from $14.6 million a year ago.

Adjusted EBITDA margin was 7.8%, 190 bps down from 9.7% in fiscal 2021. Adjusted earnings per share were $1.52 compared with $2.54 in fiscal 2021.

Financials

As of Jan 29, 2022, Dycom had cash and cash equivalents worth $310.8 million compared with $11.8 million on Jan 30, 2021. Long-term debt was $823.3 million at the end of fourth-quarter fiscal 2022 compared with $501.6 million at fiscal 2021-end.

During the reported quarter, DY repurchased 600,000 shares for $56.1 million at an average price of $93.55 per share.

Fiscal Q1 FY’23 View

For the fiscal first quarter (ended Apr 30, 2022), it expects contract revenues to grow in mid-to-high single digit year over year. The adjusted EBITDA margin is expected to increase modestly from the year-ago levels.

Zacks Rank & Recent Releases

Dycom 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 mixed results for fourth-quarter 2021. Adjusted earnings lagged the Zacks Consensus Estimate, but revenues surpassed the same. Both the metrics improved on a year-over-year basis, thanks to robust demand for its services.

EMCOR currently carries a Zacks Rank #2 (Buy). EME has gained 15.9% in the past year against a 6.8% fall of the Zacks Building Products - Heavy Construction industry it belongs to.

MasTec, Inc. MTZ reported mixed fourth-quarter 2021 results, with earnings surpassing the Zacks Consensus Estimate and revenues missing the same. The company’s earnings surpassed the consensus mark for the 25th consecutive quarter.

First-quarter 2022, MTZ guided a loss owing to a normal seasonally slow quarter, project delays, project start-up costs and integration costs related to fourth-quarter buyouts. MasTec currently carries a Zacks Rank #3.

Quanta Services Inc. PWR reported impressive earnings for fourth-quarter 2021. Adjusted earnings and revenues not only surpassed the Zacks Consensus Estimate but also surged on a year-over-year basis. Earnings beat the consensus mark for the seventh straight quarter, whereas revenues surpassed the same in four out of seven consecutive quarters.

Quanta Services currently carries a Zacks Rank #3. PWR has gained 34.7% in the past year.


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