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Why Is Dycom Industries (DY) Up 14% Since Last Earnings Report?

·4 min read

It has been about a month since the last earnings report for Dycom Industries (DY). Shares have added about 14% 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 (DY) Reports Q4 Loss, Surpasses Revenue Estimates

Dycom Industries  reported mixed results for fourth-quarter fiscal 2021 (ended Jan 30, 2021). Although its earnings missed the Zacks Consensus Estimate, the top line surpassed the same.

Earnings & Revenue Discussion

Dycom reported an adjusted loss of 7 cents per share, missing the Zacks Consensus Estimate of earnings of 5 cents. However, the reported loss was narrower than the year-ago loss of 23 cents per share. Dycom experienced a broad-based improvement in the services performed despite the complexity of a large customer program. Also, lower-than-expected disruptions from the COVID-19 pandemic helped it record improved performance.
 
Contract revenues of $750.7 million rose 1.8% year over year and surpassed the consensus mark of $726.3 million by 3.4%. Organically, revenues (excluding $5.7 million of storm-restoration services in the quarter) fell 6.2% year over year. Nonetheless, the company witnessed solid demand from one of its top five customers.
 
Its top five customers contributed 69.4% to total contract revenues, which decreased 15.5% organically. Revenues from all other customers grew 25.3% organically for the quarter.
 
Dycom’s largest customer Comcast accounted for 18.8% of total revenues. AT&T (the second-largest customer) added 16.8% to total revenues, while Verizon made up 15.7% of revenues. Lumen Technologies accounted for 13.4%, while Windstream represented 4.8% of total revenues.
 
Dycom’s backlog at the end of the reported quarter totaled $6.810 billion, comparing unfavorably with $7.314 billion at the end of fiscal 2020. Nonetheless, the backlog level grew sequentially from $5.412 billion at the end of the October-end quarter. Of the backlog, $2.787 billion is projected to be completed in the next 12 months.

Operating Highlights

Adjusted EBITDA margin of 6.1% expanded 10 bps from the year-ago level. Non-GAAP adjusted gross margin was 14.3% in the quarter, up 10 bps a year ago.
 
General and administrative expenses increased 25 bps year over year in the quarter, reflecting higher performance-based compensation, offset in part by lower administrative costs.

Financials

As of Jan 30, 2021, Dycom had cash and cash equivalents worth $11.8 million compared with $54.6 million as of Jan 25, 2020. Long-term debt was $501.6 million at the end of the reported quarter compared with $844.4 million at the end of fiscal 2020.

Fiscal 2021 Highlights

Total revenues were $3,199.2 million, down 4.2% from $3,339.7 million in 2020. Adjusted EBITDA was $311 million compared with $310 million in 2020. Adjusted earnings per share were $2.54 compared with $2.27 in 2020.

Q1 Outlook

For first-quarter fiscal 2022, the company expects contract revenues to be in line to modestly lower. Non-GAAP adjusted EBITDA, as a percentage of contract revenues, is anticipated to be in line to modestly higher. The company expects its results to be impacted by the adverse impacts of winter weather conditions experienced in many regions of the country.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted -29.32% due to these changes.

VGM Scores

At this time, Dycom Industries has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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 A. 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 #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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