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Why Is Dycom Industries (DY) Up 6.1% 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 6.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Dycom's (DY - Free Report) Q4 Earnings & Revenues Beat, Margins Fall

Dycom Industries Inc. reported stellar results in fourth-quarter fiscal 2022 (ended Jan 29, 2022). Quarterly earnings and revenues surpassed the respective Zacks Consensus Estimate and increased on a year-over-year basis. The upside was mainly backed by solid organic growth and storm restoration services.

Major industry players have been constructing or upgrading significant wireline networks across broad sections of the country to provision 1 gigabit network speeds to consumers, either directly or wirelessly using 5G technologies, which is broadening the industry as well as Dycom’s opportunities.

Earnings & Revenue Discussion

Dycom reported adjusted earnings of 2 cents per share, surpassing the Zacks Consensus Estimate and the year-ago quarter’s figure of negative 7 cents by a whopping 128.6%.

Contract revenues of $761.5 million moved up 1.4% year over year and beat the consensus mark by 6.1%. Contract revenues increased 10.1% on an organic basis (after adjusting for storm restoration services revenues and an additional week of operations in the prior-year period). The same from storm restoration services were $5.7 million in the quarter.

Its top five customers contributed 66.6% to total contract revenues, which rose 5.4% organically. Revenues from all other customers increased 20.8% organically in the quarter. The quarter marks the 12th consecutive quarter wherein DY’s all other customers in aggregate, excluding the top five customers, have grown organically.

Dycom’s largest customer AT&T (contributing 26.6% to total revenues) advanced 73.6% on an organic basis. This marked its fourth consecutive quarter of organic growth. Comcast (the second-largest customer) contributed 13.1% to total revenues, Lumen Technologies accounted for 11.7% and Verizon and Frontier represented 10.1% and 5.1% of total revenues, respectively. Frontier rose 97.2% organically. Fiber construction revenues from electric utilities increased 37.2% year over year, organically, and contributed 7.5% to total contract revenues.

Dycom’s backlog at the end of the fiscal fourth quarter totaled $5.822 billion compared with $6.810 billion at fiscal 2021-end. Of the backlog, $3.072 billion is projected to be completed in the next 12 months.

Operating Highlights

The gross margin in the quarter was 13.8%, down 50 basis points (bps) from the year-ago quarter level due to significantly higher COVID-related absences and adverse winter weather conditions. Adjusted EBITDA margin of 5.7% contracted 40 bps from the year-ago level.

Fiscal 2022 Highlights

The company reported total contract revenues of $3.13 billion, down 2.1% from $3.2 billion in fiscal 2021, primarily due to 0.2% organic revenues fall (after adjusting for storm restoration services revenues and an additional week of operations during fiscal 2021). Contract revenues from storm restoration services were $3.9 million, down from $14.6 million a year ago.

Adjusted EBITDA margin was 7.8%, 190 bps down from 9.7% in fiscal 2021. Adjusted earnings per share were $1.52 compared with $2.54 in fiscal 2021.

Financials

As of Jan 29, 2022, Dycom had cash and cash equivalents worth $310.8 million compared with $11.8 million on Jan 30, 2021. Long-term debt was $823.3 million at the end of fourth-quarter fiscal 2022 compared with $501.6 million at fiscal 2021-end.

During the reported quarter, DY repurchased 600,000 shares for $56.1 million at an average price of $93.55 per share.

Fiscal Q1 FY’23 View

For the fiscal first quarter (ended Apr 30, 2022), it expects contract revenues to grow in mid-to-high single digit year over year. Adjusted EBITDA margin is expected to increase modestly from the year-ago levels.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -57.55% 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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