Dycom Industries (DY) Q4 Earnings Beat Estimates, Sales Miss

Specialty contracting services provider, Dycom Industries Inc. (NYSE:DY) continued its winning streak for the sixth consecutive quarter, as its fourth-quarter fiscal 2017 adjusted earnings of $1.47 per share, beating the Zacks Consensus Estimate of $1.44 by 2.1%. Better-than-expected earnings helped to evoke positive investor response as shares traded 6.1% higher to close at $80.68 in yesterday’s trading session.

However, the bottom line came in 10.4% lower than the year-ago tally of $1.64.

For fiscal 2017, the company posted adjusted earnings of $168.3 million ($5.26 per share), up 13.4% from the prior-year figure of $148.4 million ($4.48).

Inside The Headlines

Dycom’s fiscal fourth-quarter contract revenues came in at $780.2 million, down 0.8% year over year. The top line also missed the Zacks Consensus Estimate of $799 million, and came at the lower end of the company’s projected range of $780–$810 million. Extensive deployment of 1-Gigabyte wireline networks by major customers and expanding core market share fuelled top-line growth during the quarter. This was somewhat offset by a near term moderation by another important customer. Organic revenues grew 4.6% year over year.

For the fiscal year, Dycom reported contract revenues of $3.1 billion, up 14.1% year over year. Acquisitions contributed $19.3 million, supplementing the revenue stream.

The company reported non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $118 million for the quarter compared with $126 million a year ago.

Dycom Industries, Inc. Price, Consensus and EPS Surprise

Dycom Industries, Inc. Price, Consensus and EPS Surprise | Dycom Industries, Inc. Quote

Liquidity

As of Jul 29, 2017, Dycom had cash and cash equivalents of $38.6 million compared with $33.8 million as of Jul 30, 2016. The company’s long-term debt was $738.3 million at quarter end, compared with $706.2 million as of Jul 30, 2016.

Guidance

The company issued guidance for first-quarter fiscal 2018, wherein adjusted earnings per share are projected in the range of 81 cents to 96 cents, on revenues within $715–$745 million. The Zacks Consensus Estimate for fiscal first-quarter earnings is currently pegged at 80 cents per share.

Our Take

Despite earnings outperformance, the company’s business remains highly vulnerable to risks associated with the U.S. telecommunications industry. Presently, the space is facing intense pricing competition. Severe spectrum crunch, coupled with gradual smartphone and tablet adoption, is compelling wireless operators to seek other options for raising revenues.

Moreover, the telecommunications industry is highly dynamic in nature. It continues to experience rapid technological, structural and competitive changes and may reduce the service requirements from this Zacks Rank #4 (Sell) company, thereby affecting its financial performance.

Stocks to Consider

Better-ranked stocks in the same space include MasTec, Inc. (NYSE:MTZ) , Sterling Construction Company Inc. (NASDAQ:STRL) and EMCOR Group, Inc. (NYSE:EME) . While MasTec and Sterling Construction sport a Zacks Rank #1 (Strong Buy), EMCOR Group holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MasTec came up with an average positive earnings surprise of 29.7% for the last four quarters, having beaten estimates every time.

Sterling Construction delivered an average positive earnings surprise of 47.0%, having surpassed estimates twice over the trailing four quarters.

EMCOR Group pulled off an average positive earnings surprise of 11.7% for the last four quarters, having beaten estimates thrice in the last four quarters.

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