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Why Is Dycom Industries (DY) Up 8% 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 8% 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 the most recent earnings report in order to get a better handle on the important drivers.
Dycom's Q3 Earnings and Revenues Top Estimates
Dycom Industries reported impressive results in third-quarter fiscal 2024 (ended Oct 28, 2023). Quarterly earnings and revenues surpassed the Zacks Consensus Estimate. Both metrics increased on a year-over-year basis. The upside was mainly backed by an increase in demand from four of its top five customers.
Earnings & Revenue Discussion
Dycom’s adjusted earnings of $2.82 per share surpassed the Zacks Consensus Estimate of $1.77 by 59.3%. The quarterly earnings increased from the year-ago adjusted figure of $1.80 per share. The uptrend was driven by higher adjusted EBITDA and higher gains on asset sales, partially offset by higher depreciation and amortization, stock-based compensation, interest expenses and taxes.
Contract revenues of $1,136.1 million increased 9% year over year and surpassed the consensus mark of $1,069 million by 6.3%. With the deployment of gigabit wireline networks, wireless/wireline converged networks and wireless networks, the company witnessed an increase in demand from four of its top five customers.
The company’s top five customers represented 54.4% of total contract revenues, which declined 8.8% organically. Revenues from all other customers increased 29.8% organically in the quarter. The quarter marks the 19th consecutive period of organic growth for DY’s all other customers in aggregate, excluding the top five.
Dycom’s largest customer, Lumen, contributed 16.5% to total revenues and rallied 47.1% organically. This marks the seventh consecutive quarter of organic growth with Lumen. AT&T (the second-largest customer) contributed 12.8% to total revenues. Comcast contributed 9.8% (up 2.2%), while Verizon represented 9.2% of total revenues and increased 10.3% organically. The company’s fifth customer contributed to 6.1% of revenues and grew 94.9% organically. Fiber construction revenues from electric utilities were $98.9 million in the quarter. Dycom’s backlog at the fiscal third-quarter end totaled $6.613 billion, up from $6.207 billion in the prior quarter. Of the backlog, $3.831 billion is projected to be completed in the next 12 months.
Operating Highlights
Gross margin of 22% in the quarter expanded 358 basis points (bps) from the year-ago level.
Depreciation and amortization expenses of $42 million were up 20% year over year. General and administrative expenses of $87.5 million increased 11.1% year over year.
Adjusted EBITDA was $166.8 million during the quarter, up 45.5% year over year. Adjusted EBITDA margin of 14.7% expanded 370 bps from the year-ago level, given improved operating performance on the higher level of revenues in the quarter.
Financials
As of Oct 28, 2023, Dycom had liquidity of $464.1 million, including cash and cash equivalents worth $15.7 million (compared with $224.2 million on Jan 28, 2023). Long-term debt was $949.4 million at the fiscal third-quarter end, up from $807.4 million at the fiscal 2023-end.
Fiscal Q4 2024 Guidance
For the fiscal fourth quarter (ending Jan 27, 2023), management expects contract revenues to be in line with the year-ago quarter’s level. DY expects $50 million of acquired contract revenues for the quarter. The adjusted EBITDA margin is expected to increase 75-125 bps from the year-ago level. For the period, Dycom expects the effective tax rate to be 26% and diluted shares of 29.7 million. Interest expenses, net, is likely to be $15.1 million and amortization expenses to be $6.8 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Dycom Industries has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, 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 C. 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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Why Is Dycom Industries (DY) Up 8% Since Last Earnings Report?
It has been about a month since the last earnings report for Dycom Industries (DY - Free Report) . Shares have added about 8% 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 the most recent earnings report in order to get a better handle on the important drivers.
Dycom's Q3 Earnings and Revenues Top Estimates
Dycom Industries reported impressive results in third-quarter fiscal 2024 (ended Oct 28, 2023). Quarterly earnings and revenues surpassed the Zacks Consensus Estimate. Both metrics increased on a year-over-year basis. The upside was mainly backed by an increase in demand from four of its top five customers.
Earnings & Revenue Discussion
Dycom’s adjusted earnings of $2.82 per share surpassed the Zacks Consensus Estimate of $1.77 by 59.3%. The quarterly earnings increased from the year-ago adjusted figure of $1.80 per share. The uptrend was driven by higher adjusted EBITDA and higher gains on asset sales, partially offset by higher depreciation and amortization, stock-based compensation, interest expenses and taxes.
Contract revenues of $1,136.1 million increased 9% year over year and surpassed the consensus mark of $1,069 million by 6.3%. With the deployment of gigabit wireline networks, wireless/wireline converged networks and wireless networks, the company witnessed an increase in demand from four of its top five customers.
The company’s top five customers represented 54.4% of total contract revenues, which declined 8.8% organically. Revenues from all other customers increased 29.8% organically in the quarter. The quarter marks the 19th consecutive period of organic growth for DY’s all other customers in aggregate, excluding the top five.
Dycom’s largest customer, Lumen, contributed 16.5% to total revenues and rallied 47.1% organically. This marks the seventh consecutive quarter of organic growth with Lumen. AT&T (the second-largest customer) contributed 12.8% to total revenues. Comcast contributed 9.8% (up 2.2%), while Verizon represented 9.2% of total revenues and increased 10.3% organically. The company’s fifth customer contributed to 6.1% of revenues and grew 94.9% organically. Fiber construction revenues from electric utilities were $98.9 million in the quarter. Dycom’s backlog at the fiscal third-quarter end totaled $6.613 billion, up from $6.207 billion in the prior quarter. Of the backlog, $3.831 billion is projected to be completed in the next 12 months.
Operating Highlights
Gross margin of 22% in the quarter expanded 358 basis points (bps) from the year-ago level.
Depreciation and amortization expenses of $42 million were up 20% year over year. General and administrative expenses of $87.5 million increased 11.1% year over year.
Adjusted EBITDA was $166.8 million during the quarter, up 45.5% year over year. Adjusted EBITDA margin of 14.7% expanded 370 bps from the year-ago level, given improved operating performance on the higher level of revenues in the quarter.
Financials
As of Oct 28, 2023, Dycom had liquidity of $464.1 million, including cash and cash equivalents worth $15.7 million (compared with $224.2 million on Jan 28, 2023). Long-term debt was $949.4 million at the fiscal third-quarter end, up from $807.4 million at the fiscal 2023-end.
Fiscal Q4 2024 Guidance
For the fiscal fourth quarter (ending Jan 27, 2023), management expects contract revenues to be in line with the year-ago quarter’s level. DY expects $50 million of acquired contract revenues for the quarter. The adjusted EBITDA margin is expected to increase 75-125 bps from the year-ago level. For the period, Dycom expects the effective tax rate to be 26% and diluted shares of 29.7 million. Interest expenses, net, is likely to be $15.1 million and amortization expenses to be $6.8 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Dycom Industries has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, 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 C. 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.