Dycom's (DY) Stock Down on Q2 Earnings Miss, Margin Falls
Dycom Industries' (DY) fiscal second-quarter results reflect lower contribution from top five customers.
Dycom Industries Inc. DY reported lackluster results for second-quarter fiscal 2022 (ended Jul 31, 2021). The top and bottom lines not only lagged the Zacks Consensus Estimate but also declined significantly on a year-over-year basis.
Shares of the company fell 5.3% on Sep 1, post the earnings release.
Earnings & Revenue Discussion
Dycom reported adjusted earnings of 60 cents per share, missing the Zacks Consensus Estimate of 73 cents by 17.8% and decreasing 49.2% from the year-ago figure of $1.18. Dycom experienced lower-than-expected revenues for several large customers, supply constraints and a tight labor market.
Contract revenues of $787.6 million dipped 4.4% year over year and missed the consensus mark of $812.74 million by 3.1%. The company witnessed higher demand from two of the top five customers. Dycom deployed 1 gigabit wireline networks, wireless/wireline converged networks and wireless networks in the reported quarter.
Dycom Industries, Inc. Price, Consensus and EPS Surprise
Its top five customers contributed 65.7% to total contract revenues, which decreased 18% organically. Revenues from all other customers grew 39.9% organically for the quarter.
Dycom’s largest customer AT&T (accounting for 22.5% of total revenues) advanced 31.9% on an organic basis. This marked its second quarterly organic growth with AT&T since the July 2019 quarter. Comcast (the second-largest customer) added 15.5% to total revenues, while Lumen Technologies accounted for 12.1%, Verizon and Frontier represented 11.5% and 4% of total revenues, respectively. Frontier grew 161.4% organically and was a top five customer for the first time during the quarter.
Dycom’s backlog at the end of the reported quarter totaled $5.895 billion, comparing unfavorably with $6.810 billion at fiscal 2021-end and $6.441 billion in the year-ago comparable period. Of the backlog, $2.655 billion is projected to be completed in the next 12 months.
Gross margin for the quarter was 17.3%, down 285 basis points (bps) from the year-ago level. Adjusted EBITDA margin of 9.4% contracted 310 bps from the year-ago level.
As of Jul 31, 2021, Dycom had cash and cash equivalents worth $261.9 million compared with $11.8 million on Jan 30, 2021. Long-term debt was $831.2 million at the end of the reported quarter compared with $501.6 million at fiscal 2021-end.
Fiscal Q3 View
For the fiscal third quarter (ended Oct 30, 2021), it expects contract revenues to be in line with the year-ago period. Adjusted EBITDA margin is expected fall year over year due to 125 bps gross margin decline and 50 bps G&A increase.
Dycom — which shares space with EMCOR Group, Inc. EME, MasTec, Inc. MTZ and North American Construction Group Ltd. NOA in the Zacks Building Products - Heavy Construction industry — currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.Click here for the 4 trades >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
EMCOR Group, Inc. (EME): Free Stock Analysis Report
Dycom Industries, Inc. (DY): Free Stock Analysis Report
MasTec, Inc. (MTZ): Free Stock Analysis Report
North American Construction Group Ltd. (NOA): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research