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Dycom (DY) Meets Q2 Earnings Estimates, Reaffirms View

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Dycom Industries Inc. (DY - Free Report) recently reported second quarter of fiscal 2019 results, with adjusted earnings of $1.05 per share and revenues of $799.5 million, both meeting the Zacks Consensus Estimate.

However, adjusted earnings declined 28.6% from the prior-year quarter, owing to approximately $1 million of higher tax expense. The overall results were negatively impacted by large-scale deployments, which were slower than expected due to customer time and tactical considerations.

Revenue Discussion

Dycom’s second-quarter contract revenues of $799.5 million were up 2.5% year over year. Organic revenues, excluding $3.8 million of storm restoration services, increased 0.8% year over year during the quarter, backed by deployment of 1-gigabit wireline networks, wireless/wireline converged networks and an increase in core market share.

Dycom’s top five customers contributed 77.9% to total contract revenues, increasing 3.3% organically. Comcast, Dycom’s largest customer, accounted for 21.4% of the total revenues. AT&T contributed 20.7%; Verizon accounted for 18.4%; CenturyLink added 13.5%; and Charter comprised 3.9% of the total revenues. However, revenues from all other customers declined 7% organically in the said quarter.

Dycom’s backlog came in at $7.881 billion as of Jul 28, 2018 versus $5.877 billion on Apr 28, 2018.

Dycom Industries, Inc. Price, Consensus and EPS Surprise

 

Operating Highlights

Gross margin was 19.6%, down 256 basis points (bps) from the year-ago figure. The downside was attributable to under-absorption of labor and field costs of large customer programs.

General and administrative expenses, as a percentage of contract revenues, grew  45 bps year over year, owing to increased labor costs. However, the increased labor cost is helping the company to expand its scale.

Adjusted EBITDA came in at $97.8 million or 12.2% of contract revenues, reflecting a decrease of 17.1% or 290 bps from the year-ago quarter.

Financials

The company had cash and cash equivalents of $23.9 million as of Jul 28, 2018 compared with $84 million on Jan 27, 2018.

Long-term debt was $727.3 million at the end of the reported quarter compared with $733.8 million at fiscal 2018-end.

Guidance

Dycom has reaffirmed its guidance for fiscal 2019, which was announced earlier this month.

For fiscal 2019, the company anticipates contract revenues in the range of $3.01-$3.11 billion. Adjusted earnings are anticipated within $2.62-$3.07 per share. Dycom expects adjusted EBITDA (as a percentage of contract revenues) in the range of 10.7-11.1%.

For third-quarter fiscal 2019, revenues are projected between $785 million and $835 million. The company expects adjusted earnings in the band of 80 cents to $1.04 per share. Adjusted EBITDA (as a percentage of contract revenues) is anticipated in the range of 11.6-12.2%.

Zacks Rank & Stocks to Consider
 
Dycom currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the same industry include North American Construction Group Ltd. (NOA - Free Report) , EMCOR Group, Inc. (EME - Free Report) and Primoris Services Corporation (PRIM - Free Report) . While North American Construction Group sports a Zacks Rank #1 (Strong Buy), EMCOR and Primoris Services both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

North American Construction Group has an expected earnings growth rate of 228.6% for 2018.

Primoris Services’ earnings growth rate for 2018 is expected to be 34.8%.

EMCOR is expected to register an EPS growth rate of 15% this year.

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