Dycom (DY) Hits 52-Week High: What's Driving the Stock?

FLR DY WLDN MPTI

Dycom Industries, Inc. (DY - Free Report) reached a new 52-week high of $116.92 on Dec 26. The stock pulled back to end the trading session at $116.13, up 1% from the previous day’s closing price of $114.95.

The Zacks Rank #3 (Hold) company’s shares increased 28.9% in the past three months, outperforming the Zacks Building Products - Heavy Construction industry’s 7.1% growth, the Zacks Construction sector’s 21.9% increase and the S&P 500 Index’s 10.4% rise.

The company is benefiting from increased demand from four of its top five customers, attributable to the deployment of gigabit wireline networks, wireless/wireline converged networks and wireless networks. Furthermore, consistent contract wins are boosting its backlog momentum, thus increasing its growth prospects, despite the ongoing macroeconomic uncertainties.

The company’s earnings estimate for fiscal 2024 has moved north to $7.49 per share from $7.30 per share in the past 30 days. The stock portrays a positive trend, indicating robust fundamentals and elevating the expectation of outperformance in the near term, despite an uncertain economic scenario.

Attractive Factors of the Stock

Top Customers Boost Growth: A significant amount of Dycom’s revenues is from its top five customers. In third-quarter fiscal 2024, it witnessed demand growth from four of its top five customers. The company’s largest customer, Lumen, contributed 16.5% to total revenues and rallied 47.1% organically, marking the seventh consecutive quarter of organic growth with Lumen. AT&T, the second-largest customer, contributed 12.8% to total revenues. Comcast contributed 9.8% (up 2.2%) while Verizon represented 9.2% of total revenues and increased 10.3% organically. The company’s fifth customer contributed to 6.1% of revenues and grew 94.9% organically.

On a combined basis, the company’s top-five customers generated approximately 66.7%, 66.2% and 74.1% of revenues during fiscal 2023, fiscal 2022 and fiscal 2021, respectively.

Consistent Contract Wins: Dycom’s diverse portfolio of services, including engineering, construction, maintenance and installation services, has led to its increased demand. The company has secured new contracts from Frontier, AT&T, Charter and various rural fiber construction companies in third-quarter fiscal 2024, which will boost the its growth momentum. Over the last few years, Dycom has successfully increased the long-term value of its maintenance business, which is expected to complement its deployment of one gigabit and wireless-wireline converged networks.

Going forward, we expect the company’s string of contract wins and strong customer relationships to act as growth drivers. It remains positive about substantial opportunities across a broad array, despite prevailing market uncertainties.

Growing Backlog: Dycom’s backlog activity is increasing as it booked new work and renewed existing work. At the end of the fiscal third quarter of 2024, the company’s backlog totaled $6.61 billion, up from $6.12 billion in the comparable year-ago period, and sequentially from $6.21 billion. Of the fiscal third-quarter backlog, $3.83 billion is projected to be completed in the next 12 months.

Dycom remains optimistic about the strengthening industry environment, given strong end-market drivers. Although the recent market trend is a concern for the company, telecommunication networks that are crucial infrastructure for the country are witnessed to be gaining momentum.

Key Picks

Here are some better-ranked stocks from the same sector.

Fluor Corporation (FLR - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

It has a trailing four-quarter earnings surprise of 37.5%, on average. Shares of FLR have increased 14.9% in the past year. The Zacks Consensus Estimate for FLR’s 2023 sales and earnings per share (EPS) indicates an improvement of 12.4% and 197.6%, respectively, from the prior-year levels.

M-tron Industries, Inc. (MPTI - Free Report) currently sports a Zacks Rank of 1. MPTI delivered a trailing four-quarter earnings surprise of 35.6%, on average. It has surged 288.2% in the past year.

The Zacks Consensus Estimate for MPTI’s 2023 sales and EPS indicates growth of 30.6% and 156.7%, respectively, from the previous year.

Willdan Group, Inc. (WLDN - Free Report) currently sports a Zacks Rank of 1. WLDN delivered a trailing four-quarter earnings surprise of a whopping 850.6%, on average. The stock has gained 24.3% in the past year.

The Zacks Consensus Estimate for WLDN’s 2023 sales and EPS indicates growth of 14.1% and 47.7%, respectively, from a year ago.

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