A month has gone by since the last earnings report for Dycom Industries (DY Quick QuoteDY - Free Report) . Shares have lost about 1.2% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Dycom’s Q2 Earnings Miss, Margin Falls

Dycom Industries Inc. reported lackluster results for second-quarter fiscal 2022 (ended Jul 31, 2021). The top and bottom lines not only lagged the Zacks Consensus Estimate but also declined significantly on a year-over-year basis.

Earnings & Revenue Discussion

Dycom reported adjusted earnings of 60 cents per share, missing the Zacks Consensus Estimate of 73 cents by 17.8% and decreasing 49.2% from the year-ago figure of $1.18. Dycom experienced lower-than-expected revenues for several large customers, supply constraints and a tight labor market.

Contract revenues of $787.6 million dipped 4.4% year over year and missed the consensus mark of $812.74 million by 3.1%. 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 65.7% to total contract revenues, which decreased 18% organically. Revenues from all other customers grew 39.9% organically for the quarter.

Dycom’s largest customer AT&T (accounting for 22.5% of total revenues) advanced 31.9% on an organic basis. This marked its second quarterly organic growth with AT&T since the July 2019 quarter. Comcast (the second-largest customer) added 15.5% to total revenues, while Lumen Technologies accounted for 12.1%, Verizon and Frontier represented 11.5% and 4% of total revenues, respectively. Frontier grew 161.4% organically and was a top five customer for the first time during the quarter.

Dycom’s backlog at the end of the reported quarter totaled $5.895 billion, comparing unfavorably with $6.810 billion at fiscal 2021-end and $6.441 billion in the year-ago comparable period. Of the backlog, $2.655 billion is projected to be completed in the next 12 months.

Operating Highlights

Gross margin for the quarter was 17.3%, down 285 basis points (bps) from the year-ago level. Adjusted EBITDA margin of 9.4% contracted 310 bps from the year-ago level.

Financials

As of Jul 31, 2021, Dycom had cash and cash equivalents worth $261.9 million compared with $11.8 million on Jan 30, 2021. Long-term debt was $831.2 million at the end of the reported quarter compared with $501.6 million at fiscal 2021-end.

Fiscal Q3 View

For the fiscal third quarter (ended Oct 30, 2021), it expects contract revenues to be in line with the year-ago period. Adjusted EBITDA margin is expected fall year over year due to 125 bps gross margin decline and 50 bps G&A increase.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -22.54% due to these changes.

VGM Scores

Currently, Dycom Industries has a nice Growth Score of B, 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 B. 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. It's no surprise Dycom Industries has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.