Dycom's (DY) Stock Jumps 25% On Q1 Earnings & Revenue Beat

Dycom Industries Inc.’s (NYSE:DY) shares jumped more than 25% on May 21, 2019 after the company came up with impressive first-quarter fiscal 2020 (ended Apr 27, 2019) results, wherein earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of 53 cents topped the consensus estimate of 43 cents by 23.3%. However, the figure declined 18.5% on a year-over-year basis. The company pointed out that although major customers have stepped up infrastructure spending, higher-than-expected costs have pressurized Dycom’s margins.

Dycom Industries, Inc. Price, Consensus and EPS Surprise

Revenue Discussion

Dycom reported fiscal first-quarter contract revenues of $833.7 million, increasing 14% year over year. The reported figure surpassed the consensus mark of $770.6 million by 8.2%. Organically, revenues improved 15.8% year over year during the quarter, backed by deployment of 1-gigabit wireline networks, wireless/wireline converged networks and wireless networks. Notably, organic revenues excluded $4.7 million of storm restoration services and contract revenues of $6.1 million from an acquired business in the reported quarter.

Its top five customers contributed 80.4% to total contract revenues, increasing 19.4% organically. Dycom’s largest customer AT&T (NYSE:T) accounted for 25.1% of the total revenues. AT&T grew 28.7% organically. Verizon (NYSE:VZ), which contributed 21.6%, was up 47.2% organically; Comcast (NASDAQ:CMCSA) accounted for 16.4%; CenturyLink (NYSE:CTL) added 17.8%; and Windstream, representing 4.1% of the total revenues, climbed 38% organically. Revenues from all other customers grew 3% organically in the quarter.

Dycom’s backlog at the end of the reported quarter totaled $7.051 billion versus $7.33 billion at January 2019-end. Approximately $2.723 billion of the backlog is projected to be completed in the next 12 months.

Operating Highlights

Adjusted gross margin of 16.8% declined 161 basis points (bps). Margins were impacted by cost of a large customer program.

Adjusted EBITDA margin contracted 130 bps to 8.8% compared with 10.1% in the year-ago quarter.

Financials

Dycom had cash and cash equivalents of $33.6 million as of Apr 27, 2019 compared with $128.3 million on Jan 26, 2019.

Its long-term debt was $867.4 million at the end of the first quarter compared with $867.6 million at fiscal 2019-end.

Second Quarter of Fiscal 2020 Guidance

The company anticipates contract revenues in the range of $835-$885 million, above the Zacks Consensus Estimate of $840.1 million, considering the mid-point of the guided range. Also, the said range is above the year-ago reported figure of $799.5 million.

Adjusted earnings are anticipated within 70-92 cents per share. Considering the mid-point of this guidance, the estimated range is below the consensus mark of 86 cents per share for the quarter. Also, the said range is way below the prior-year reported figure of $1.05 per share. Dycom expects adjusted EBITDA margin to decrease from the year-ago period.

Zacks Rank & Stocks to Consider

Dycom currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same industry include EMCOR Group, Inc. (NYSE:EME) , Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) and North American Construction Group Ltd. (TO:NOA) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EMCOR is expected to register an EPS growth rate of 6.2% this year.

Great Lakes’ earnings growth rate for 2019 is expected to be 300%.

North American Construction Group has an expected earnings growth rate of 221.4% for 2019.

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