Bull of the Day: Dycom Inds (DY)

Dycom Industries (DY - Analyst Report) continues to be at the forefront of the fiber-based broadband revolution, and has significantly beaten the Zacks Consensus Earnings estimate for 7 consecutive quarters.  These big beats are driven by their top 5 customers, who are the leading fiber optic service companies in America.  These major companies like Comcast, and AT&T have increased their fiber to home, and fiber to small business services, which have also accelerated their deployment of fiber-based broadband.  Most importantly, these companies have indicated that they are going to lay more fiber in 2016, and 2017.  Due to these factors, Dycom is the Zacks Bull of the Day.

This Zacks Rank #1 (Strong Buy) is a leading provider of specialty contracting services throughout the United States. These services include engineering, construction, maintenance and installation services to telecommunications providers, underground locating services to various utilities including telecommunications providers, and other construction and maintenance services to electric utilities and others.

In their most recent quarter, the company soundly beat both the Zacks Consensus Earnings and Revenue Estimates for the fourth consecutive quarter.  Further, management saw contract revenues increase by 29.2%, while organic contract revenues grew by 21.9% YoY.  Also, total revenues from acquired businesses improved 1978% YoY.  

Most impressively, Dycom’s saw year over year double digit organic growth from their top 5 customers for Q1 16; AT&T improved 15.4%, Comcast rose 21.8%, Centurylink was up 16.5%, Verison was up 71.2%, and their unnamed customer (which everyone believes is Google) improved 120.9%.  Further, these top 5 customers have all indicated that they will continue to lay more fiber broadband in 2016.  This is shown by Dycom’s total backlog increasing 68%, and new orders going up 76%.

During the quarter, the company repurchased 954,000 shares for about $70 million.  This leaves about $50 million remaining on their stock buyback program through February 2017.

Increasing Estimates

As you can see in the graph below, estimates and expectations have significantly increased over the past year.



Over the past 30 days, estimates for Dycom have increased for Q2 16, Q3 16 FY 16, and FY 17; Q2 16 rose from $0.39 to $0.55, Q3 16 improved from $0.72 to $0.83, FY 16 jumped up from $3.27 to $3.86, and FY 17 vaulted from $3.78 to $4.42.

Bottom Line

As the U.S.’s largest wireline, wireless, and cable contractor supporting network Dycom is uniquely positioned to take advantage of the fiber broadband revolution.  Moreover, the government’s Connect America Fund Phase II is expected to build out broadband to nearly 7.3 million rural consumers in 45 states on one U.S territory over the next few years.  This program is expected to benefit Dycom’s top and bottom lines throughout the entirety of the program.  

by Brian Hamilton

- Source: http://www.zacks.com/commentary/64394/bull-of-the-day-dycom-inds-dy#sthash.9LT4opkn.dpuf