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Dycom Industries (DY) Down 10.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Dycom Industries (DY - Free Report) . Shares have lost about 10.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Dycom's (DY - Free Report) Q3 Earnings & Revenues Beat Estimates

Dycom Industries Inc. reported solid results for third-quarter fiscal 2022 (ended Oct 30, 2021), wherein earnings and revenues surpassed the respective Zacks Consensus Estimate.

Major industry participants have been constructing or upgrading significant wireline networks across broad sections of the country. This is generally designed to provision 1 gigabit network speeds directly to consumers or wirelessly using 5G technologies. This is meaningfully broadening the industry’s set of opportunities.

Earnings & Revenue Discussion

Dycom reported adjusted earnings of 95 cents per share, surpassing the Zacks Consensus Estimate of 79 cents by 20.3%. In the year-ago period, earnings were $1.06 per share.

Contract revenues of $854 million gained 5.4% year over year and beat the consensus mark by 2%. 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 65.4% to total contract revenues, which grew 6.6% organically. Overall, top five customers’ sales declined 3.5% organically. Revenues from all other customers grew 32.5% organically for the quarter.

Dycom’s largest customer AT&T (accounting for 23.4% of total revenues) advanced 68% on an organic basis. This marked its third consecutive quarter of organic growth. Comcast (the second-largest customer) added 14.2% to total revenues, Lumen Technologies accounted for 12.1%, and Verizon and Frontier represented 10.9% and 4.8% of total revenues, respectively. Frontier grew 118.6% organically. It is to be noted that this marks the 11th consecutive quarter wherein DY’s all other customers in aggregate, excluding the top five customers, have grown organically.

Dycom’s backlog at the end of the reported quarter totaled $5.896 billion, comparing unfavorably with $6.810 billion at fiscal 2021-end and $5.412 billion in the year-ago comparable period. Of the backlog, $2.938 billion is projected to be completed in the next 12 months.

Operating Highlights

Gross margin for the quarter was 17.3%, down 140 bps from the year-ago level. Adjusted EBITDA margin of 9.7% contracted 180 bps from the year-ago level. The downside reflected higher fuel costs and the impact of revenue declines from several large customers.

Financials

As of Oct 30, 2021, Dycom had cash and cash equivalents worth $263.7 million compared with $11.8 million on Jan 30, 2021. Long-term debt was $827.2 million at the end of the reported quarter compared with $501.6 million at fiscal 2021-end.

Fiscal Q4 View

For the fiscal fourth quarter (ended Jan 29, 2021), it expects contract revenues to grow modestly year over year. Adjusted EBITDA margin (as a percentage of contract revenues) is expected to range from in line to modestly higher.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -210.71% due to these changes.

VGM Scores

At this time, Dycom Industries has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 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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