Dycom Industries (DY) Down 21.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Dycom Industries (DY). Shares have lost about 21.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dycom Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Dycom’s Q4 Loss Wider Than Anticipated, Q1 Guidance Weak

Dycom Industries Inc. reported lackluster fourth-quarter fiscal 2020 (ended Jan 25, 2020) results. Its bottom line not only missed the Zacks Consensus Estimate but also declined from the year-ago level. The company provided weak fiscal first-quarter guidance.

During the quarter, it reported adjusted loss of 23 cents per share, wider than the consensus estimate of 2 cents. In the year-ago quarter, the company reported earnings of 10 cents per share. Dycom highlighted that adverse weather, seasonal effects, challenges surrounding a large customer program, and a slow start at a specific customer in rolling out its new system weighed on margins in the quarter.

Revenue & Operating Highlights

Dycom’s quarterly contract revenues came in at $737.6 million, increasing 1.5% year over year. The reported figure also surpassed the consensus mark of $727.6 million by 1.4%.

Organically, revenues (excluding storm restoration services of $20.4 million in the year-ago quarter) grew 1.3% year over year in the fiscal fourth quarter. This marked the seventh consecutive quarter of organic growth. The upside was backed by higher demand from three 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 77.2% to total contract revenues, decreasing 1.2% organically. Dycom’s largest customer Verizon (NYSE:VZ) accounted for 21.9% of the total revenues. Verizon grew 3.3% year over year organically. CenturyLink (NYSE:CTL) (second-largest customer) added 18.3% to total revenues and increased 31.1% organically. AT&T (NYSE:T) contributed 18% to revenues; Comcast (NASDAQ:CMCSA) accounted for 13.8%; and Windstream — representing 5.3% of the total revenues — climbed 45.9% organically. Revenues from all other customers grew 10.6% organically in the quarter.

Dycom’s backlog at the end of the reported quarter totaled $7.314 billion versus $6.349 billion at fiscal third-quarter end. Of the backlog, $2.716 billion is projected to be completed in the next 12 months.

Gross margin during the quarter was 14.2%, which was 175 basis points (bps) below the company’s expectations. Adjusted EBITDA margin also contracted 200 bps to 6% from 8% in the year-ago quarter.

Financials

As of Jan 25, 2020, Dycom had cash and cash equivalents of $54.6 million compared with $128.3 million on Jan 26, 2019. Long-term debt was $844.4 million at the end of fiscal 2020 compared with $867.6 million at fiscal 2019-end.

First-Quarter Fiscal 2021 Guidance

The company anticipates contract revenues in the range of $730-$780 million. The said range indicates a decline from the year-ago figure of $833.7 million.

Bottom line (on an adjusted basis) is expected within a loss of 9 cents to earnings of 8 cents per share. The estimated range suggests a decline from the prior-year reported earnings of 53 cents per share.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -106.67% due to these changes.

VGM Scores

Currently, Dycom Industries has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Dycom Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.