Dycom To Buy Certain Telecom-Related Assets From Goodman

Dycom Industries Inc. (NYSE:DY) inked a definitive agreement to buy certain telecom-related assets of Goodman Networks Incorporated for about $107.5 million in cash.

Dycom expects to finance the deal with a combination of cash and borrowings under its senior secured credit facility.

Subject to the fulfillment of customary closing conditions, the deal is slated to be concluded by Jun 30.

Per the agreement, Dycom will buy certain assets and associated liabilities in Goodman's current wireline and wireless network deployment businesses.

Inherently, Dycom’s acquisition is likely to generate about $150–$165 million in revenue over the next 12 months, by providing services that include wireless network constructionin Texas, Georgia, Southern California and other markets.

Dycom expects the EBITDA (earnings before interest, taxes, depreciation and amortization) of the acquired business as a percentage of revenue to be roughly in line with its own ratio in the 2018 fiscal year.

Goodman agreed to sell the assets as part of its efforts to shift its strategic focus toward its professional services and field services business segments, while de-leveraging its business and strengthening its financial position.

Dycom’s operations encompass engineering, program management, construction and maintenance for utility and telecom companies. In recent times, Dycom has been generating higher sales and earnings as telecom providers continue to upgrade their networks.

As telecommunication networks face increasing demand, customers need to expand the capacity and improve the performance of existing networks and in certain instances, deploy new networks. We believe that Dycom’s business stands to benefit greatly from proliferating demand for network bandwidth and mobile broadband.

The company is particularly benefiting from extensive deployment of 1-Gigabyte wireline networks by major industry participants. These positive industry trends are unlocking lucrative opportunities for Dycom across a broad range of its existing customers, and this indicates robust prospects for this Zacks Rank #1 (Strong Buy) company.

Some other stocks in the broader construction sector that are worth a look now include Installed Building Products, Inc. (NYSE:IBP) , Tutor Perini Corporation (NYSE:TPC) and USG Corporation (NYSE:USG) , each carrying the same rank as Dycom.