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Why Is Dycom Industries (DY) Up 16.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Dycom Industries (DY - Free Report) . Shares have added about 16.1% 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 catalysts.

Dycom Q3 Earnings Match Estimates, Increase Y/Y

Dycom 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.

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.

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.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -78.41% due to these changes.

VGM Scores

At this time, Dycom Industries has a great 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 second quintile 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dycom Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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