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Dycom Industries (DY) Up 6.8% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Dycom Industries, Inc. (DY - Free Report) . Shares have added about 6.8% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is DY 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 drivers.

Dycom Misses on Q1 Earnings, Shares Down on Weak View

Dycom broke its streak of beating estimates for eight quarters, as its first-quarter fiscal 2019 adjusted earnings of 65 cents per share lagged the Zacks Consensus Estimate by 4.4%. The company posted earnings of $1.30 in the year-ago quarter.

The company also lowered guidance for fiscal 2019. The dismal quarterly results triggered a huge sell-off in the company’s shares, which fell 20.3% in yesterday’s trading session.

Inside the Headlines

Dycom’s first-quarter fiscal 2019 contract revenues came in at $731.4 million, down 7% year over year. The top line missed the Zacks Consensus Estimate of $736 million. Organic revenues contracted 10% year over year.

Increase in demand for deployment of 1-Gigabyte wireline networks and wireless/wireline converged networks was more than offset by a near-term moderation in spending by a large customer as well as revenue declines from certain other customers. Dycom’s top five customers accounted for 78.8% of revenues and declined 8.8% organically. Revenues from all other customers declined 14.2% organically.

The company reported non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $73.7 million for the quarter compared with $108.2 million in the year-ago quarter. A prolonged winter and the costs related to initiations of large customer programs persistently hurt profits.

Liquidity

As of Apr 28, 2018, Dycom had cash and cash equivalents of $57.9 million compared with $84 million as of Jan 28, 2017. The company’s long-term debt was $731.7 million at the end of the reported quarter compared with $733.8 million on Jan 28, 2017.

Guidance

Dycom slashed guidance for fiscal 2019. For fiscal 2019, the company anticipates contract revenues in the range of $3.23-$3.43 billion, compared with the previous range of $3.30-$3.50 billion. Adjusted earnings are anticipated to between $4.26 and $5.15, down from the previous range of $5.22-$6.14.

For second-quarter fiscal 2019 (ending on Jul 28, 2018), the company expects adjusted earnings per share in the band of $1.13-$1.28. Revenues are projected between $830 million and $860 million.

The company expects revenues in the coming quarters to stabilize and also projects strong demand from several heavyweight customers. Dycom is optimistic about fiber deep cable capacity projects, 1 gigabit deployments and initial phases of fiber deployments for emerging wireless technologies. However, the company’s margins are likely to suffer due to timing volatility, customer spending modulations and an adverse mix of work activities. Going forward, under absorption of labor and field costs might continue to hurt margins.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 34.6% due to these changes.

Dycom Industries, Inc. Price and Consensus

VGM Scores

At this time, DY has a strong Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise DY has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.




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