Dycom (DY) to Report Q3 Earnings: What's in the Offing?

Dycom Industries, Inc.’s DY third-quarter fiscal 2020 results are likely to reflect year-over-year decrease in earnings and revenues. In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 29.8% and grew 3.8% from the prior-year period owing to higher revenues from a large customer program. Revenues also topped analysts’ expectation by 2.8% and increased 3.8% year over year.

This specialty contracting services provider — which shares space in the Building Products - Heavy Construction industry with EMCOR Group, Inc. EME, MasTec, Inc. MTZ and North American Construction Group Ltd. NOA — has broadly underperformed the industry year to date. The stock has lost 8.1% against its industry’s growth of 29.5% in the said period.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has been unchanged at 72 cents per share over the past 30 days. This indicates a decrease of 26.5% from the year-ago reported figure.

The consensus mark for revenues is pegged at $846.4 million, suggesting a decline of 0.2% from the year-ago quarter.

Dycom Industries, Inc. Price and EPS Surprise

Dycom Industries, Inc. Price and EPS Surprise

Dycom Industries, Inc. price-eps-surprise | Dycom Industries, Inc. Quote

Factors to Note

Despite reporting strong contract revenues in the last reported quarter, the company has been vulnerable to timing uncertainty, post initiation of large-scale network deployments. Notably, delayed deployments from a major cable customer were a major factor behind the lowered outlook for second-half fiscal 2020.

The company anticipates contract revenues in the range of $820-$870 million for the fiscal third quarter, indicating a decline from the year-ago figure of $848.24 million.

Although major customers have stepped up infrastructure spending, higher-than-expected cost of a large customer program is expected to have dented margins. Also, accelerated complexity of the above-mentioned program might have added to woes. These headwinds are expected to have hurt its profitability in the quarter to be reported. Dycom expects adjusted EBITDA margin to decrease from the year-ago period.

Overall, the company anticipates adjusted earnings within 60-80 cents per share, suggesting a decrease from the year-ago profit level of 98 cents.

Although Dycom has a solid track record of booking new contracts and renewing the existing ones, the current backlog level — which enhances revenue visibility for the to-be-reported quarter — is discouraging. Markedly, the Zacks Consensus Estimate for backlog is pegged at $6,545 million, suggesting a 10.5% decrease from the prior-year figure of $7,313 million.

Despite the above-mentioned headwinds, the company has been immensely benefiting from extensive deployment of 1-gigabit wireline networks by major customers. The same is expected to have somewhat benefited fiscal third-quarter revenues. For the fiscal third quarter, the consensus estimate for the company’s Telecommunications revenues — contributing 91% to total revenues — is currently pegged at $774 million, indicating an increase from $773 million a year ago.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Dycom this time around. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive surprise. This is not the case here, as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Dycom currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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