We are reaffirming our Underperform recommendation on Dycom
Industries with a target price of $28. This specialty contracting
firm reported modest fourth-quarter 2014 results. The company's
business is dependent upon the level of capital expenditures.
Recently, the ongoing changes in the telecommunications industry
are leading to uncertainty in capital expenditure levels which can
prove to be a headwind for the company. Further, unpredictable
weather conditions can weigh on its margins significantly. However,
the company has been benefiting from growing demand for high-speed
mobile Internet and 4G/LTE services which remains a positive.
Dycom Industries Inc. (DY) is a North America-based specialty
contracting firm operating in the telecom industry. The company,
which was listed on NYSE in the 1990s, provides diverse services
such as engineering, construction, maintenance and installation
services for the cable and telephone companies.
Moreover, Dycom specializes in providing construction management
and assessment services to various telephone and cable operators.
Furthermore, the company focuses on designing the fiber optic,
copper and coaxial cable systems. They also undertake the necessary
excavation and construction work for projects. The company provides
these services to telecom companies for setting up new networks,
apart from providing support services for maintaining and expanding
existing networks. Though the major part of the company's revenues
is obtained from telecom industry, it also provides some services
for the Underground Facility Locating, Gas and Electricity
Dycom provides the specialty constructing services comprises of
Engineering: Dycom provides integrated services for designing
aerial, underground and buried fiber optic, copper, and coaxial
cable systems for telecom, cable and multiple system operators.
These services include providing construction management, skilled
personnel for the inspections and comprehensive engineering
services, after obtaining the required permits. These systems are
designed by the external plant engineers and drafters who are
responsible for making an efficient transmission network to connect
the consumer site with the service provider's station. Apart from
this, the company also provides the telecom providers with
engineering services for designing concept boxes and terminals for
the service area, the equipments required for smooth transitions
and drops for both buried and aerial systems. The company also
manages the smooth functioning of feeder and distribution cable
pairs and routing of fiber cable systems.
Construction, Maintenance, and Installation: Dycom specializes
in the placement and linking of fiber, copper, and coaxial cables.
The company also provides the tools and equipments to do the same
after completing the required excavation. It provides installation,
maintenance and repair services for the new and existing networks.
Apart from these, Dycom undertakes the installation and maintenance
of such products like digital video recorders, set top boxes and
modems for the subscribers of cable television system. For the
wireless network, the company's service package comprises of tower
construction, installation of lines and antenna, constructing
foundation and equipment pad, fabrication for the required
equipment and materials as well as testing services at the site.
The company's premise wiring services are useful for various
entities including both public and private ones.
Underground Facility Locating Services: The company provides
underground facility locating services to a number of utility
companies to avoid damage of the underground facilities like
telephone, cable television, power, water, sewer, and gas lines.
Dycom's expertise in these not only minimizes the damage but also
controls its impact on the people in the surrounding areas
Electric and Gas Utilities and Other Construction and
Maintenance Services: Dycom also offers services to electric and
gas utility companies for both the construction and maintenance of
gas pipelines and power distribution network. These services are
generally provided on a stand-alone basis. However, at times the
company is required to provide comprehensive services for deploying
both telecom and electric infrastructure at new constructions.
Apart from these, the company is adept in installation and
maintenance of natural gas transmission networks.
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