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High Cost, Low Backlog to Hurt Dycom's (DY) Q2 Earnings
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Dycom Industries, Inc. (DY - Free Report) is scheduled to report second-quarter fiscal 2020 results on Aug 28, before the opening bell.
In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 23.3% but declined 18.5% from the prior-year period due to higher-than-expected costs related to a large customer program. The same is likely to hurt results in the quarter to be reported.
This specialty contracting services provider — which shares space in the Building Products - Heavy Construction industry with EMCOR Group, Inc. (EME - Free Report) , MasTec, Inc. (MTZ - Free Report) and North American Construction Group Ltd. (NOA - Free Report) — has broadly underperformed the industry year to date. The stock has lost 25.1% against its industry’s growth of 12.3% in the said period.
Let’s see how things are shaping up for this announcement.
How are Estimates Faring?
Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.
For the to-be-reported quarter, Dycom’s earnings are projected at 84 cents per share, which indicates a decrease of 20% from the year-ago period. Revenues are estimated to be $860.49 million, suggesting growth of 7.6% from the year-ago quarter.
Dycom’s fiscal second-quarter results are likely to be negatively impacted by under absorption of labor and field costs. The company pointed out that although major customers have stepped up infrastructure spending, higher-than-expected cost of a large customer program is expected to dent margins.
Despite reporting strong contract revenues in the last reported quarter, the company has been vulnerable to timing uncertainty, post initiation of large-scale network deployments. The same is likely to hurt its fiscal second-quarter results. In fact, the company anticipates adjusted earnings within the range of 70-92 cents per share, implying a decrease from the year-ago profit level of $1.05. Adjusted EBITDA margin is also likely to decrease from the year-ago period.
Dycom has been undertaking strategic initiatives that are eventually inflating costs, which might hamper the bottom line. Also, accelerated complexity of the above-mentioned program raises a concern. These headwinds are expected to hurt its profitability in the quarter to be reported.
Although Dycom has a solid track record of booking new contracts and renewing the existing ones, its existing backlog level — which enhances visibility for the to-be-reported quarter — is discouraging. Markedly, the Zacks Consensus Estimate for backlog is pegged at $7.105 billion, suggesting a 9.8% decrease from the prior-year figure of $7.881 billion.
Despite the above-mentioned headwinds, the company has been immensely benefiting from extensive deployment of 1-gigabit wireline networks by major customers. The same is expected to benefit fiscal second-quarter revenues as well. For the fiscal second quarter, the company expects revenues in the range of $835-$885 million, pointing to growth from the year-ago figure of $799.5 million.
What the Zacks Model Says
Our proven model does not conclusively show that Dycom is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
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High Cost, Low Backlog to Hurt Dycom's (DY) Q2 Earnings
Dycom Industries, Inc. (DY - Free Report) is scheduled to report second-quarter fiscal 2020 results on Aug 28, before the opening bell.
In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 23.3% but declined 18.5% from the prior-year period due to higher-than-expected costs related to a large customer program. The same is likely to hurt results in the quarter to be reported.
This specialty contracting services provider — which shares space in the Building Products - Heavy Construction industry with EMCOR Group, Inc. (EME - Free Report) , MasTec, Inc. (MTZ - Free Report) and North American Construction Group Ltd. (NOA - Free Report) — has broadly underperformed the industry year to date. The stock has lost 25.1% against its industry’s growth of 12.3% in the said period.
Let’s see how things are shaping up for this announcement.
How are Estimates Faring?
Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.
For the to-be-reported quarter, Dycom’s earnings are projected at 84 cents per share, which indicates a decrease of 20% from the year-ago period. Revenues are estimated to be $860.49 million, suggesting growth of 7.6% from the year-ago quarter.
Dycom Industries, Inc. Price and EPS Surprise
Dycom Industries, Inc. price-eps-surprise | Dycom Industries, Inc. Quote
Factors at Play
Dycom’s fiscal second-quarter results are likely to be negatively impacted by under absorption of labor and field costs. The company pointed out that although major customers have stepped up infrastructure spending, higher-than-expected cost of a large customer program is expected to dent margins.
Despite reporting strong contract revenues in the last reported quarter, the company has been vulnerable to timing uncertainty, post initiation of large-scale network deployments. The same is likely to hurt its fiscal second-quarter results. In fact, the company anticipates adjusted earnings within the range of 70-92 cents per share, implying a decrease from the year-ago profit level of $1.05. Adjusted EBITDA margin is also likely to decrease from the year-ago period.
Dycom has been undertaking strategic initiatives that are eventually inflating costs, which might hamper the bottom line. Also, accelerated complexity of the above-mentioned program raises a concern. These headwinds are expected to hurt its profitability in the quarter to be reported.
Although Dycom has a solid track record of booking new contracts and renewing the existing ones, its existing backlog level — which enhances visibility for the to-be-reported quarter — is discouraging. Markedly, the Zacks Consensus Estimate for backlog is pegged at $7.105 billion, suggesting a 9.8% decrease from the prior-year figure of $7.881 billion.
Despite the above-mentioned headwinds, the company has been immensely benefiting from extensive deployment of 1-gigabit wireline networks by major customers. The same is expected to benefit fiscal second-quarter revenues as well. For the fiscal second quarter, the company expects revenues in the range of $835-$885 million, pointing to growth from the year-ago figure of $799.5 million.
What the Zacks Model Says
Our proven model does not conclusively show that Dycom is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Dycom currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>