It has been about a month since the last earnings report for Dycom Industries (
DY Quick Quote DY - Free Report) . Shares have lost about 0.3% 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 its most recent earnings report in order to get a better handle on the important drivers.
Dycom's Q3 Earnings & Revenue Beat Estimates
Dycom Industries Inc. reported solid results for third-quarter fiscal 2023 (ended Oct 29, 2022). The top and bottom lines surpassed their respective Zacks Consensus Estimate and increased on a year-over-year basis.
The upside was mainly backed by solid organic growth of the top five customers. Earnings & Revenue Discussion
Dycom’s adjusted earnings of $1.69 per share (after adjusting for income tax benefits of 11 cents per share) surpassed the Zacks Consensus Estimate of $1.28 by 32% and increased 77.9% from the year-ago adjusted figure of 95 cents. The uptrend was driven by higher adjusted EBITDA, lower depreciation and amortization, and higher gains on asset sales, partially offset by higher stock-based compensation and interest expense.
Contract revenues of $1,042.4 million increased 22.1% year over year and topped the consensus mark of $974 million by 7%. Organically, contract revenues increased 22.1%. The company’s top five customers represented 66.5% of total contract revenues, which rose 27.4% organically. Revenues from all other customers increased 13.3% organically in the quarter. The quarter marks the 15th consecutive period of organic growth for DY’s all other customers in aggregate, excluding the top five. Dycom’s largest customer AT&T (contributing 24.8% to total revenues), advanced 29.4% on an organic basis. This marked its seventh consecutive quarter of organic growth. Lumen (the second-largest customer) contributed 13.7% to total revenues, Comcast contributed 10.4%, while Verizon and Frontier represented 9.1% and 8.5% of total revenues, respectively. Lumen and Frontier rose 64.5% and 115.4% organically, respectively. Fiber construction revenues from electric utilities increased 53.6% year over year, organically, and contributed 7.9% to total contract revenues in the quarter. Dycom’s backlog at the end of the fiscal third quarter totaled $6.116 billion compared with $5.896 billion at the third quarter of fiscal 2022-end. Of the backlog, $3.276 billion is projected to be completed in the next 12 months. Operating Highlights
Depreciation and amortization expenses of $35.5 million were down 6.1% year over year. General and administrative expenses of $78.8 million increased 17.8% year over year.
Adjusted EBITDA was $114.6 million during the quarter, up 37.9% year over year. Adjusted EBITDA margin of 11% expanded 130 bps from the year-ago level. Financials
As of Oct 29, 2022, Dycom had liquidity of $444.3 million, including cash and cash equivalents worth $65.3 million compared with $310.8 million on Jan 29, 2022. Long-term debt was $811.4 million at the end of third-quarter fiscal 2023, down from $823.3 million at the fiscal 2022-end.
Fiscal Q4 Guidance
For the fiscal fourth quarter (ending Jan 28, 2023), management expects contract revenues to grow in mid-to-high-single digits from the year-ago reported figure. The adjusted EBITDA margin is expected to increase modestly from the year-ago levels. For the period, Dycom expects the effective tax rate to be 27% and diluted shares of 30.1 million. Interest expense is likely to be $11.8 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -35.41% due to these changes.
At this time, Dycom Industries has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
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 #2 (Buy). We expect an above average return from the stock in the next few months.