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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.

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This story originally appeared on Zacks

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.

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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

Dycom Industries, Inc. Price, Consensus and EPS Surprise

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

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.

Operating Highlights

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.

Financials

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.

Zacks Rank

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.



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