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Here's Why Dycom (DY) Stock Fell Despite In-Line Q3 Earnings

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Dycom Industries, Inc. (DY - Free Report) reported mixed results for third-quarter fiscal 2021 (ended Oct 24, 2020). Notably, earnings during the quarter met the Zacks Consensus Estimate and improved on a year-over-year basis.

However, revenues missed the consensus mark and declined year over year. Following the announcement, shares of the company fell 16% during trading hours on Nov 24. Investors’ sentiments might have been impacted by the company’s lower expectations for fiscal fourth-quarter revenues owing to the uncertainty related to the COVID-19 pandemic.

Earnings & Revenue Discussion

Dycom reported adjusted earnings of $1.06 per share, in line with the Zacks Consensus Estimate. Moreover, the metric increased 20.5% from the year-ago earnings of 88 cents per share. Dycom experienced broad-based improvement in the services performed despite the complexity of a large customer program. Also, improved operating leverage and lower-than-expected disruptions from the COVID-19 pandemic helped it record higher year-over-year earnings.

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 $810.3 million dropped 8.4% year over year and missed the consensus mark of $822 million by 1.4%. Organically, revenues (excluding $8.9 million of storm restoration services in the quarter) fell 9.4% year over year. Nonetheless, the company witnessed solid demand from one of its top five customers.

The company’s top five customers contributed 71.6% to total contract revenues, which decreased 15.4% organically. Revenues from all other customers grew 11.1% organically for the quarter.

Dycom’s largest customer Verizon accounted for 17.9% of total revenues. Comcast (the second-largest customer) added 17.7% to total revenues, surging 9% on an organic basis, while CenturyLink made up 16.6% of revenues. AT&T accounted for 14.7%, while Windstream represented 4.8% of the total revenues.

Dycom’s backlog at the end of the reported quarter totaled $5.412 billion, comparing unfavorably with $7.314 billion at fiscal 2020-end and $6.349 billion in the year-ago comparable period. Of the backlog, $2.339 billion is projected to be completed in the next 12 months.

Operating Highlights

Gross margin for the quarter came in at 18.7%, up 68 basis points (bps) from the year-ago level. Adjusted EBITDA margin of 11.5% expanded 108 bps from the year-ago level.

Financials

As of Oct 24, 2020, Dycom had cash and cash equivalents worth $12 million compared with $54.6 million on Jan 25, 2020. Long-term debt was $490 million at the end of the reported quarter compared with $844.4 million at fiscal 2020-end.

Fiscal Fourth-Quarter 2021 View

For the fiscal fourth quarter (ended Jan 30, 2021), the company expects lower contract revenues. However, it expects margins to range from in line to modestly higher compared with the prior-year quarter.

Zacks Rank & Peer Releases

Dycom, which shares space with Primoris Services Corporation (PRIM - Free Report) in the Zacks Building Products - Heavy Construction industry, 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 - Free Report) reported impressive earnings for third-quarter 2020. Adjusted earnings surpassed the Zacks Consensus Estimate, mainly driven by cost discipline amid the COVID-19 pandemic.

MasTec, Inc. (MTZ - Free Report) reported impressive results for third-quarter 2020, wherein earnings not only beat the Zacks Consensus Estimate but also grew on a year-over-year basis. Notably, adjusted earnings exceeded management’s expectations on the back of solid segmental performances (barring Oil and Gas and Communications).

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