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Dycom (DY) Rallies 33.9% in 6 Months: Will the Rally Last?
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Dycom Industries, Inc. (DY - Free Report) has been gaining from fiber network deployment and higher demand from broad constructions or enhancement of significant wireline networks across broad sections of the country to provide gigabit network speeds to individual consumers and businesses either directly or through a wireless mode using 5G technologies.
Although macroeconomic effects and supply constraints might influence the near-term execution of some customer plans, shares of Dycom have been gaining from the industry tailwinds. This Palm Beach Gardens, FL-based specialty contracting service provider’s shares have risen 33.9% in the past six months, outperforming the Zacks Building Products - Heavy Construction industry’s 6.3% rise.
The fiscal 2023 earnings estimates for this Zacks Rank #1 (Strong Buy) company have moved 8.5% upward over the past seven days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
Let’s delve deeper into the major driving factors.
Fiber Network Deployment: Nowadays, key industry players, like Dycom, have been constructing or upgrading significant wireline networks across broad sections of the country. These wireline networks are generally designed to provision gigabit network speeds to individual consumers and businesses either directly or wirelessly using 5G technologies. Notably, a single high-capacity fiber network can most cost-effectively deliver services to both consumers and businesses. This enables multiple revenue streams from a single investment. This view is increasing the appetite for fiber deployments, and has been creating opportunities.
Increasing access to high-capacity telecommunications continues to be crucial to society, especially in rural America. The Infrastructure Investment and Jobs Act includes more than $40 billion for the construction of rural communications networks in unserved and underserved areas across the country. In addition, substantially all states are commencing programs that will provide funding for telecommunications networks even prior to the initiation of funding under the Infrastructure Act.
Dycom has been providing program management, planning, engineering and design, aerial, underground and wireless construction and fulfillment services for gigabit deployments. These deployments include networks consisting entirely of wired network elements and converged wireless/wireline multi-user networks. Fiber network deployment opportunities are increasing in rural America as new industry participants respond to emerging societal initiatives.
Solid Backlog Level: Backlog activity during the fiscal second quarter reflects solid performance as it booked new work and renewed existing work. Dycom expects considerable opportunities across a broad array of customers. Dycom’s backlog was $6.028 billion at second-quarter fiscal 2023 end, up from $5.593 billion a year ago. Of this backlog, approximately $3.111 billion is expected to be completed in the next 12 months.
Higher Earnings Growth Rate: Earnings growth is also a key factor in stock valuation. The Zacks Consensus Estimate for fiscal 2023 earnings of $3.56 per share indicates 134.2% year-over-year growth. The solid growth rate depicts the stock's promising future. For fiscal 2024, the company’s earnings are expected to increase 47.8% year over year.
Solid ROE: DY’s superior return on equity (ROE) is also indicative of its growth potential. The company’s ROE currently stands at 11.4%, higher than the industry’s 10.9%. This indicates efficiency in using shareholders’ funds and the ability to generate profit with minimum capital usage.
3 Construction Stocks Hogging the Limelight
Some other stocks, which warrant a look in the Construction sector, include Arcosa (ACA - Free Report) , United Rentals (URI - Free Report) and Primoris Services Corporation (PRIM - Free Report) .
Arcosa — sporting a Zacks Rank #1 — is a manufacturer of infrastructure-related products and services which serves construction, energy and transportation markets.
ACA’s expected earnings growth rate for fiscal 2022 is 7.8%. The Zacks Consensus Estimate for current-year earnings has improved 13.7% over the past 30 days.
United Rentals — currently flaunting a Zacks Rank #1 — is the largest equipment rental company in the world.
URI’s expected earnings growth rate for 2022 is 43.8%. The Zacks Consensus Estimate for current-year earnings has improved 6.4% over the past 30 days.
Primoris — a Zacks Rank #2 (Buy) company — is a specialty contractor company operating in the United States and Canada. A robust backlog level of more than $4 billion and solid contract awards in the Energy/Renewables and Utilities segments depict incredible momentum in the future despite the supply chain and permitting challenges. Utility-scale solar projects continued to drive the progress of the Energy/Renewables segment.
Primoris’ earnings for 2022 are expected to grow by 18.4%.
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Dycom (DY) Rallies 33.9% in 6 Months: Will the Rally Last?
Dycom Industries, Inc. (DY - Free Report) has been gaining from fiber network deployment and higher demand from broad constructions or enhancement of significant wireline networks across broad sections of the country to provide gigabit network speeds to individual consumers and businesses either directly or through a wireless mode using 5G technologies.
Although macroeconomic effects and supply constraints might influence the near-term execution of some customer plans, shares of Dycom have been gaining from the industry tailwinds. This Palm Beach Gardens, FL-based specialty contracting service provider’s shares have risen 33.9% in the past six months, outperforming the Zacks Building Products - Heavy Construction industry’s 6.3% rise.
The fiscal 2023 earnings estimates for this Zacks Rank #1 (Strong Buy) company have moved 8.5% upward over the past seven days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
Let’s delve deeper into the major driving factors.
Fiber Network Deployment: Nowadays, key industry players, like Dycom, have been constructing or upgrading significant wireline networks across broad sections of the country. These wireline networks are generally designed to provision gigabit network speeds to individual consumers and businesses either directly or wirelessly using 5G technologies. Notably, a single high-capacity fiber network can most cost-effectively deliver services to both consumers and businesses. This enables multiple revenue streams from a single investment. This view is increasing the appetite for fiber deployments, and has been creating opportunities.
Increasing access to high-capacity telecommunications continues to be crucial to society, especially in rural America. The Infrastructure Investment and Jobs Act includes more than $40 billion for the construction of rural communications networks in unserved and underserved areas across the country. In addition, substantially all states are commencing programs that will provide funding for telecommunications networks even prior to the initiation of funding under the Infrastructure Act.
Dycom has been providing program management, planning, engineering and design, aerial, underground and wireless construction and fulfillment services for gigabit deployments. These deployments include networks consisting entirely of wired network elements and converged wireless/wireline multi-user networks. Fiber network deployment opportunities are increasing in rural America as new industry participants respond to emerging societal initiatives.
Solid Backlog Level: Backlog activity during the fiscal second quarter reflects solid performance as it booked new work and renewed existing work. Dycom expects considerable opportunities across a broad array of customers. Dycom’s backlog was $6.028 billion at second-quarter fiscal 2023 end, up from $5.593 billion a year ago. Of this backlog, approximately $3.111 billion is expected to be completed in the next 12 months.
Higher Earnings Growth Rate: Earnings growth is also a key factor in stock valuation. The Zacks Consensus Estimate for fiscal 2023 earnings of $3.56 per share indicates 134.2% year-over-year growth. The solid growth rate depicts the stock's promising future. For fiscal 2024, the company’s earnings are expected to increase 47.8% year over year.
Solid ROE: DY’s superior return on equity (ROE) is also indicative of its growth potential. The company’s ROE currently stands at 11.4%, higher than the industry’s 10.9%. This indicates efficiency in using shareholders’ funds and the ability to generate profit with minimum capital usage.
3 Construction Stocks Hogging the Limelight
Some other stocks, which warrant a look in the Construction sector, include Arcosa (ACA - Free Report) , United Rentals (URI - Free Report) and Primoris Services Corporation (PRIM - Free Report) .
Arcosa — sporting a Zacks Rank #1 — is a manufacturer of infrastructure-related products and services which serves construction, energy and transportation markets.
ACA’s expected earnings growth rate for fiscal 2022 is 7.8%. The Zacks Consensus Estimate for current-year earnings has improved 13.7% over the past 30 days.
United Rentals — currently flaunting a Zacks Rank #1 — is the largest equipment rental company in the world.
URI’s expected earnings growth rate for 2022 is 43.8%. The Zacks Consensus Estimate for current-year earnings has improved 6.4% over the past 30 days.
Primoris — a Zacks Rank #2 (Buy) company — is a specialty contractor company operating in the United States and Canada. A robust backlog level of more than $4 billion and solid contract awards in the Energy/Renewables and Utilities segments depict incredible momentum in the future despite the supply chain and permitting challenges. Utility-scale solar projects continued to drive the progress of the Energy/Renewables segment.
Primoris’ earnings for 2022 are expected to grow by 18.4%.