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On June 11, we upgraded Dycom Industries Inc. (DY - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Dycom Industries has been witnessing rising earnings estimates on the back of strong fiscal third-quarter 2013 results and an enhanced guidance for fourth quarter and fiscal 2014. Moreover, this leading provider of specialty contracting services delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 17%. The long-term expected earnings growth rate for this stock is 19.5%   

The company released its third quarter fiscal 2013 results in May with an EPS of 21 cents per share, beating Zacks Consensus Estimate of 17 cents by 23.5%. Dycom Industries reported total contract revenue of $ 437.4 million, up 47.7% from the prior-year quarter. The revenues benefited strongly from organic growth, which was up 6.2% year over year. Revenues in the quarter also benefited strongly from subsidiaries acquired during last few quarters. The company recorded a benefit of $122.9 million from its recent acquisition of Quanta Services.

Dycom Industries believes its strong competitive position and strategic market initiatives will facilitate it to perform well as it moves ahead. Revenue in fourth quarter fiscal 2013 is expected to be in the range of $455.0 million to $475.0 million, with an EPS in the range of 40 cents to 47 cents.

The Zacks Consensus Estimate for fourth quarter fiscal 2013 increased 18.42% over the last 30 days to 45 cents per share as all the estimates were revised higher. The current estimate is within the guidance range provided by Dycom Industries. For fiscal 2013, four out of the five estimates were revised higher, lifting the Zacks Consensus Estimate by 8.5% to $1.15.

Other Stocks to Consider

The following companies operating in the construction sector also have favorable Zacks Rank and are performing well and, hence, are worth considering.

1)      Primoris Services (PRIM - Snapshot Report) carries a Zacks  Rank #2 (Buy)

2)      Chicago Bridge (CBI - Analyst Report) holds a Zacks  Rank #2 (Buy)

3)      Orion Marine Group, Inc (ORN - Snapshot Report) with a Zacks Rank # 2 (Buy)

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