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Dycom (DY) Stock Up Above 14% on Q1 Earnings & Guidance Beat

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Dycom Industries Inc.’s (DY - Free Report) shares jumped more than 14% on May 19 after the company reported impressive earnings results for first-quarter fiscal 2021 (ended Apr 25, 2020). Notably, both the top and the bottom line of the company surpassed its projections despite a challenging economic backdrop.

Given the significant uncertainties stemming from the COVID-19, the company refrained from providing any guidance for the fiscal second quarter as well as the subsequent quarters. Nonetheless, it expects the ongoing quarter’s adjusted EBITDA growth to be consistent with the year-ago reported figure on the back of stable demand for its services.

During the quarter, Dycom reported adjusted earnings of 36 cents per share. The Zacks Consensus Estimate was of a loss of 4 cents per share. However, the metric fell 32.1% from the year-ago quarter’s earnings. Nonetheless, the bottom line substantially came ahead of the company’s guided range of a loss of 9 cents to earnings of 8 cents per share. Dycom has been facing issues regarding a large customer program while a slow start at a specific customer’s rollout of its new system weighed on its earnings performance.

Revenue & Operating Highlights

Contract revenues of $814.3 million dipped 2.3% year over year but surpassed the consensus mark of $738.7 million by 10.2%. Notably, the reported figure exceeded the company’s forecast of $730-$780 million.

Dycom Industries, Inc. Price, Consensus and EPS Surprise

Organically, revenues (excluding storm restoration services of $4.7 million in the year-ago quarter) slid 1.8% year over year. The company witnessed increased demand from the two of its top five customers owing to the deployment of 1-gigabit wireline networks, wireless/wireline converged networks and wireless networks.

The company’s top five customers contributed 78.5% to total contract revenues, decreasing 3.9% organically. Dycom’s largest customer Verizon accounted for 21.6% of the total revenues. While AT&T (second-largest customer) reflected 18.9% of revenues, CenturyLink added 18.3% to total revenues, surging 40.8% on organic basis. Comcast accounted for 14.5% while Windstream — representing 5.2% of the total revenues — climbed 26.1% organically. Revenues from all other customers grew 7% organically in the quarter.

Dycom’s backlog at the end of the reported quarter totaled $6.442 billion comparing unfavorably with $7.314 billion at fiscal 2020-end and $7.051 billion in the year-ago comparable quarter. This downside was due to the customers’ reprioritization of the components of a large program. Of the backlog, $2.512 billion is projected to be completed in the next 12 months.

Gross margin during the quarter was 16.5%, up 80 basis points (bps) from the predicted level. Adjusted G&A expense, as a percentage of contract revenues, declined 18 bps from the prior-year number. Adjusted EBITDA margin of 8.6% contracted 20 bps from the year-ago level.

Financials

As of Apr 25, 2020, Dycom had cash and cash equivalents worth $643.9 million compared with $54.6 million on Jan 25, 2020. Borrowings under its revolving line of credit were $675 million in the quarter. Long-term debt was $1.36 billion at the end of the reported quarter compared with $844.4 million at fiscal 2020-end.

Fiscal 2021 View

For the full fiscal, the company anticipates capital expenditures, net of disposal proceeds, within $60-$70 million, a reduction of $60 million from its prior guidance.

Zacks Rank & Peer Releases

Dycom, which shares space with Great Lakes Dredge & Dock Corporation in the Zacks Building Products - Heavy Construction industry, currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MasTec, Inc. (MTZ - Free Report) , currently carrying a Zacks Rank of 3, delivered impressive results for first-quarter 2020. Despite COVID-19 impacts, both the top and the bottom line surpassed the Zacks Consensus Estimate and outpaced expectations on the back of solid segmental performances (barring Oil and Gas).

EMCOR Group Inc. (EME - Free Report) , currently carrying a Zacks Rank #4 (Sell), reported first-quarter 2020 results wherein earnings met the Zacks Consensus Estimate but revenues missed the same.

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