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Here's Why Investors Should Retain Dycom (DY) Stock Now
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Dycom Industries, Inc. (DY - Free Report) has been benefiting from higher demand for network bandwidth and mobile broadband, extended geographic reach, and proficient program management and network planning services.
Shares of this Palm Beach Gardens, FL-based specialty contracting service provider have rallied 41% over the past six months against the industry’s 0.6% decline. This upside was led by a solid performance.
Dycom recently reported stellar results for fourth-quarter fiscal 2022, with earnings and revenues surpassing the Zacks Consensus Estimate and increasing on a year-over-year basis. This marked the first quarter since October 2019 wherein its top five customers grew organically.
Yet, persistent impacts of the complexity of a large customer program, lower year-over-year revenues related to other large customers and higher fuel costs are concerns.
Prospects in Telecommunication Business: As telecommunications networks face increased demand, customers need to expand the capacity and improve the performance of existing networks and in certain instances, deploy new networks. Presently, a number of major industry participants are deploying significant wireline networks to offer bandwidth-enabling 1-gigabit speeds using 5G technologies, thereby creating significant opportunities for Dycom.
Although Dycom’s backlog of $5.822 billion at fiscal fourth quarter-end was down 15% year over year, its 12-month backlog rose 10% year over year. Of this backlog, approximately $3.072 billion is expected to be completed in the next 12 months. Backlog activity during the fiscal fourth quarter reflects solid performance as it booked new work and renewed existing work. Dycom expects considerable opportunities across a broad array of customers.
Solid Momentum in Engineering & Construction Work: Several large programs have gained momentum in recent times, and many new contracts have commenced meaningful activity, thus propelling Dycom’s growth. Although it expects the upcoming results to be impacted by uncertain economic conditions and challenges surrounding a large customer program, the business is likely to gain momentum as most of its works are deemed essential for the economy. Encouragingly, wireless construction activity in support of newly available spectrum bands has started and is expected to get a boost this year.
Higher Estimated Earnings Growth Rate: The Zacks Consensus Estimate for fiscal 2023 earnings calls for 96.7% year-over-year growth. The same for revenues indicates 9.2% year-over-year growth.
Headwinds
Macroeconomic uncertainty resulting from COVID-19 has been influencing some of its customers’ plans, thereby impacting Dycom’s business. For fourth-quarter fiscal 2022, gross margins were 13.8% of revenues, down 50 basis points from the year-ago quarter, reflecting persistent impacts of the complexity of a large customer program, lower revenues year over year related to other large customers and higher fuel costs.
Also, the automotive and equipment supply chain remains a challenge, particularly for the large truck chassis required for specialty equipment. Hence, prices of capital equipment are increasing.
Key Picks
Fluor Corporation (FLR - Free Report) : Fluor — a Zacks Rank #1 company — is gaining from the "Building a Better Future" initiative, which is focused on enhancing markets outside the traditional oil and gas sector, fair and balanced commercial deals, financial discipline, and high-performing business culture. It made significant progress toward strategic goals that comprise the reduction of outstanding debt by 30% and identified ways for more than $150 million in annual cost savings.
Over the past 30 days, the Zacks Consensus Estimate for Fluor’s 2022 earnings has increased from $1.12 to $1.34 per share, indicating 42.6% year-over-year growth.
Sterling Construction Company, Inc. (STRL - Free Report) : Sterling — a Zacks Rank #2 (Buy) company — has been benefiting from broad-based growth across the E-Infrastructure, Building and Transportation solutions segments.
The consensus mark for Sterling’s fiscal 2022 earnings has increased from $2.63 to $2.86 per share over the past 30 days. This suggests 33% year-over-year growth.
AECOM (ACM - Free Report) : AECOM — a Zacks Rank #2 company — is a leading solutions provider for supporting professional, technical and management solutions for diverse industries across end markets. ACM has been continuously focusing on delivering industry-leading margins and unlocking capital to promote growth as well as innovation. Also, focus on higher-margin and lower-risk Professional Services businesses bodes well.
Over the past 30 days, the consensus estimate for AECOM’s earnings for fiscal 2022 has increased from $3.35 to $3.40 per share, implying a 20.6% year-over-year improvement.
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Here's Why Investors Should Retain Dycom (DY) Stock Now
Dycom Industries, Inc. (DY - Free Report) has been benefiting from higher demand for network bandwidth and mobile broadband, extended geographic reach, and proficient program management and network planning services.
Shares of this Palm Beach Gardens, FL-based specialty contracting service provider have rallied 41% over the past six months against the industry’s 0.6% decline. This upside was led by a solid performance.
Dycom recently reported stellar results for fourth-quarter fiscal 2022, with earnings and revenues surpassing the Zacks Consensus Estimate and increasing on a year-over-year basis. This marked the first quarter since October 2019 wherein its top five customers grew organically.
Yet, persistent impacts of the complexity of a large customer program, lower year-over-year revenues related to other large customers and higher fuel costs are concerns.
Image Source: Zacks Investment Research
Let’s delve deeper into the factors supporting this Zacks Rank #3 (Hold) company’s growth trajectory. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Growth Drivers
Prospects in Telecommunication Business: As telecommunications networks face increased demand, customers need to expand the capacity and improve the performance of existing networks and in certain instances, deploy new networks. Presently, a number of major industry participants are deploying significant wireline networks to offer bandwidth-enabling 1-gigabit speeds using 5G technologies, thereby creating significant opportunities for Dycom.
Although Dycom’s backlog of $5.822 billion at fiscal fourth quarter-end was down 15% year over year, its 12-month backlog rose 10% year over year. Of this backlog, approximately $3.072 billion is expected to be completed in the next 12 months. Backlog activity during the fiscal fourth quarter reflects solid performance as it booked new work and renewed existing work. Dycom expects considerable opportunities across a broad array of customers.
Solid Momentum in Engineering & Construction Work: Several large programs have gained momentum in recent times, and many new contracts have commenced meaningful activity, thus propelling Dycom’s growth. Although it expects the upcoming results to be impacted by uncertain economic conditions and challenges surrounding a large customer program, the business is likely to gain momentum as most of its works are deemed essential for the economy. Encouragingly, wireless construction activity in support of newly available spectrum bands has started and is expected to get a boost this year.
Higher Estimated Earnings Growth Rate: The Zacks Consensus Estimate for fiscal 2023 earnings calls for 96.7% year-over-year growth. The same for revenues indicates 9.2% year-over-year growth.
Headwinds
Macroeconomic uncertainty resulting from COVID-19 has been influencing some of its customers’ plans, thereby impacting Dycom’s business. For fourth-quarter fiscal 2022, gross margins were 13.8% of revenues, down 50 basis points from the year-ago quarter, reflecting persistent impacts of the complexity of a large customer program, lower revenues year over year related to other large customers and higher fuel costs.
Also, the automotive and equipment supply chain remains a challenge, particularly for the large truck chassis required for specialty equipment. Hence, prices of capital equipment are increasing.
Key Picks
Fluor Corporation (FLR - Free Report) : Fluor — a Zacks Rank #1 company — is gaining from the "Building a Better Future" initiative, which is focused on enhancing markets outside the traditional oil and gas sector, fair and balanced commercial deals, financial discipline, and high-performing business culture. It made significant progress toward strategic goals that comprise the reduction of outstanding debt by 30% and identified ways for more than $150 million in annual cost savings.
Over the past 30 days, the Zacks Consensus Estimate for Fluor’s 2022 earnings has increased from $1.12 to $1.34 per share, indicating 42.6% year-over-year growth.
Sterling Construction Company, Inc. (STRL - Free Report) : Sterling — a Zacks Rank #2 (Buy) company — has been benefiting from broad-based growth across the E-Infrastructure, Building and Transportation solutions segments.
The consensus mark for Sterling’s fiscal 2022 earnings has increased from $2.63 to $2.86 per share over the past 30 days. This suggests 33% year-over-year growth.
AECOM (ACM - Free Report) : AECOM — a Zacks Rank #2 company — is a leading solutions provider for supporting professional, technical and management solutions for diverse industries across end markets. ACM has been continuously focusing on delivering industry-leading margins and unlocking capital to promote growth as well as innovation. Also, focus on higher-margin and lower-risk Professional Services businesses bodes well.
Over the past 30 days, the consensus estimate for AECOM’s earnings for fiscal 2022 has increased from $3.35 to $3.40 per share, implying a 20.6% year-over-year improvement.