A month has gone by since the last earnings report for Dycom Industries (DY). Shares have lost about 7.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dycom Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Dycom's Q3 Earnings & Revenues Beat Estimates, Margins Up Y/Y

Dycom Industries Inc. reported strong results for third-quarter fiscal 2025 (ended Oct. 26, 2024). Contract revenues and earnings surpassed their respective Zacks Consensus Estimate and increased on a year-over-year basis.

Despite solid fiscal third-quarter results and strong fiscal fourth-quarter revenue growth projection, DY expects modest margin improvements.

Earnings & Revenue Discussion

Dycom reported adjusted earnings per share (EPS) of $2.68, which beat the Zacks Consensus Estimate of $2.35 by 14% and increased 20.2% from $2.23 year over year. The third-quarter fiscal 2024 EPS excludes 59 cents related to after-tax benefits received from the impacts of a change order and the closeout of several projects.

Contract revenues of $1.27 billion surpassed the consensus mark of $1.22 billion by 4.2% and grew 12% year over year. Contract revenues rose 7.6% on an organic basis. Acquired businesses (net of storm) contributed $80.1 million, and storm restoration services added $46.3 million to total revenues.

The company’s top five customers contributed 55.7% to total contract revenues (54.4% contributed in the prior year), which inched up 16.7%, organically. Revenues from all other customers decreased 3% organically in the quarter.

Dycom’s largest customer, AT&T, contributed 20.9% to total revenues and grew organically by 58.4%. Lumen (the second-largest customer) contributed 11.5% to total revenues. Customer #3 added 8.2%, Comcast contributed 8.1% and Brightspeed represented 7% of total revenues. Organic revenues from Customer #3 and Brightspeed were up 50.2% and 43.3%, respectively, year over year.

Operations & Backlog Details

Gross margin improved 45 basis points (bps) to 20.8% compared with 20.4% a year ago.

Adjusted EBITDA increased 19.3% to $170.7 million from $113.5 million reported a year ago. Adjusted EBITDA margin of 13.4% expanded 52 bps from the year-ago level.

Dycom’s backlog at the fiscal third-quarter end totaled $7.856 billion compared with $6.917 billion at the fiscal 2024-end. Of the backlog, $4.467 billion is projected to be completed in the next 12 months.

Financials

As of Oct. 26, 2024, Dycom had liquidity of $462.8 million, including cash and cash equivalents worth $15.3 million compared with $101.1 million as of Jan. 27, 2024. Long-term debt was $1.09 billion at the fiscal third-quarter end, up from $791.4 million at the fiscal 2024-end.

In the past nine months of 2024, DY repurchased 210,000 shares of its common stock for $29.8 million at an average price of $141.84 per share.

Fiscal Fourth-Quarter View

For the fiscal fourth quarter (ending on Jan. 25, 2025), DY expects contract revenues to grow by mid to high-single digits year over year. This includes $35 million of acquired contract revenues for the quarter. Organic revenues are expected to increase in the low to mid-single digits.

The adjusted EBITDA margin is expected to increase 25 bps from the year-ago level of 9.8%.

For the fiscal fourth quarter, Dycom expects the effective tax rate to be 26% and diluted shares of 29.5 million. Interest expenses, net, is likely to be $16.5 million. Stock-based compensation is likely to be $9.3 million and amortization expenses is expected to be $9.9 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -12.46% due to these changes.

VGM Scores

Currently, Dycom Industries has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dycom Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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