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Why Is Dycom Industries (DY) Down 16.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Dycom Industries (DY - Free Report) . Shares have lost about 16.7% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

Dycom Surpasses Q3 Earnings Estimates, Updates View

Dycom Industries Inc. reported third quarter of fiscal 2019 results, wherein adjusted earnings of 98 cents per share and revenues of $848.2 million beat the Zacks Consensus Estimate by 8.9% and 5.2%, respectively.

However, adjusted earnings declined from the prior-year profit level of 99 cents.

Nonetheless, the company generated double-digit organic revenue growth for the first time since the April 2017 quarter. The upside is primarily an outcome of improving results from top customers, with four of its top five customers growing organically.

Meanwhile, Dycom raised its fiscal 2019 revenue guidance, while slightly lowered the mid-point of EPS view.

Revenue Discussion

Dycom’s third-quarter contract revenues of $848.2 million were up 12% year over year. Organic revenues increased 12.9% year over year during the quarter, backed by deployment of 1-gigabit wireline networks and wireless/wireline converged networks. Notably, organic revenues exclude $3.9 million of storm restoration services and contract revenues of $8.8 million from an acquired business in the reported quarter.

Its top five customers contributed 78.4% to total contract revenues, increasing 18.3% organically. Comcast, Dycom’s largest customer, accounted for 20.8% of the total revenues. Comcast grew 8.7% organically. AT&T contributed 19.4% and was up 14.9% organically; Verizon accounted for 20.5% and grew 115.9% organically; CenturyLink added 14%; and Windstream comprised 3.7% of the total revenues and grew 1% organically. However, revenues from all other customers declined 2.9% organically in the said quarter.

Dycom’s backlog came in at $7.313 billion as of Oct 27, 2018 versus $7.881 billion on Jul 28, 2018.

Operating Highlights

Gross margin was 19%, down 156 basis points (bps) from the year-ago figure. General and administrative expenses, as a percentage of contract revenues, declined 43 bps year over year.
Adjusted EBITDA came in at $98.6 million or 11.6% of contract revenues, reflecting a decrease of 1% or 130 bps from the year-ago quarter.

Financials

The company had cash and cash equivalents of $21.5 million as of Oct 27, 2018 compared with $84 million on Jan 27, 2018.

Long-term debt was $867.8 million at the end of the reported quarter compared with $733.8 million at fiscal 2018-end.

Fourth Quarter of Fiscal 2019 Guidance

The company anticipates contract revenues in the range of $695-$745 million. Adjusted earnings are anticipated within 2-24 cents per share. Dycom expects adjusted EBITDA (as a percentage of contract revenues) in the range of 8.4-9.2%.

Fiscal 2019 Guidance

For fiscal 2019, the company anticipates contract revenues in the range of $3.074-$3.124 billion. Adjusted earnings are now anticipated within $2.70-$2.92 versus $2.62-$3.07 per share expected earlier. Dycom expects adjusted EBITDA (as a percentage of contract revenues) in the range of 10.7-10.8% versus 10.7-11.1% projected earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -29.79% due to these changes.

VGM Scores

At this time, Dycom Industries has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, 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 D. 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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