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Dycom Industries (DY) Down 1.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Dycom Industries (DY - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dycom Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Dycom (DY - Free Report) Reports Q1 Loss, Misses on Revenues

Dycom Industries Inc. reported first-quarter fiscal 2022 (ended May 1, 2021) results, wherein earnings and revenues missed the respective Zacks Consensus Estimate.

Earnings & Revenue Discussion

Dycom reported adjusted loss of 4 cents per share against the Zacks Consensus Estimate of earnings of 13 cents. In the year-ago quarter, the company reported earnings of 36 cents per share.

Contract revenues of $727.5 million declined 10.7% year over year and missed the consensus mark of $766 million by 5.1%. Organically, revenues (excluding $3.9 million of storm-restoration services) fell 11.1% year over year. Notably, the company witnessed higher demand from two of the top five customers. Dycom deployed 1 gigabit wireline networks, wireless/wireline converged networks and wireless networks in the reported quarter.

Its top five customers contributed 68.2% to total contract revenues, which decreased 23% organically. Nonetheless, revenues from all other customers grew 31.9% organically for the quarter, the highest growth rate in at least nine years. This marks the ninth consecutive quarter wherein all other customers (barring the top five customers) have grown organically.

Dycom’s largest customer AT&T (accounting for 21.4% of total revenues) advanced 0.9% on an organic basis. This marked its first quarterly organic growth with AT&T since July 2019 quarter. Comcast (the second-largest customer) added 18% to total revenues and grew 10.7% organically, while Verizon accounted for 12.6% of revenues. Lumen Technologies accounted for 11.8%, while Windstream Corporation represented 4.4% of total revenues.

Dycom’s backlog at the end of the reported quarter totaled $6.528 billion, comparing unfavorably with $6.81 billion at the end of fourth-quarter fiscal 2021. Of the backlog, $2.746 billion is projected to be completed in the next 12 months.

Operating Highlights

Adjusted EBITDA margin of 6.1% contracted 250 basis points (bps) from the year-ago level. Gross margins were 14.8% for the quarter, down 169 bps from a year ago. This downside was due to the impact of a large customer program and lower revenues from other large customers. Also, adverse winter weather conditions in many regions of the country during the first half of the quarter impacted margin.

General and administrative expenses increased 112 bps year over year for the quarter, reflecting higher stock-based compensation and administrative costs.

Financials

As of May 1, 2021, Dycom had cash and cash equivalents worth $330.6 million compared with $11.8 million on Jan 30, 2021. Long-term debt was $835.2 million at the end of the reported quarter compared with $501.6 million at fiscal 2021-end.

Fiscal Q2 Outlook

For second-quarter fiscal 2022, the company expects contract revenues to be in line to modestly lower year over year. Non-GAAP Adjusted EBITDA, as a percentage of contract revenues, is anticipated to decrease from the year-ago quarter. It expects gross margin to be impacted by approximately 200 basis points year over year. The tepid expectation is due to the impact of a large customer program and lower revenues from other large customers that are expected to have reduced spending in the first half of this calendar year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -35.52% due to these changes.

VGM Scores

Currently, Dycom Industries has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 this revision indicates a downward shift. It's no surprise Dycom Industries has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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