A month has gone by since the last earnings report for Dycom Industries (DY - Free Report) . Shares have added about 0.2% in that time frame, underperforming 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 catalysts.
Dycom Meets Q2 Earnings Estimates, Reaffirms View
Dycom Industries 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.
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 the 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.
Gross margin was 19.6%, down 256 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.
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.
Dycom reaffirmed its guidance for fiscal 2019, which was announced in August 2018.
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%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Dycom Industries has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 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.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Dycom Industries has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.