Summary

  • Dycom received rating upgrades from brokers Raymond James and Wells Fargo.
  • Broker Raymond James stated that Dycom could see an uptick in the demand for its fibre construction services.
  • In Q2 2023, Dycom reported that its contract revenues increased by 7.1% to US$1.042 billion.

Construction firm Dycom Industries Inc. (NYSE: DY) received a rating upgrade from broker Raymond James, causing the stock price to rise by around 2% to US$83.78 on Friday. The rating upgrade came based on the forecast rise of AT&T, a key client of Dycom’s.

Dycom Industries Inc. offers contracting services such as program management, engineering, and installation services, primarily catering to telecommunications providers and utilities. The company provides fibre construction services to AT&T, a telecommunications provider in the US.

Brokerage Raymond James stated that other communication provider companies may also look at fibre upgrades over the next several years. As per the broker, Dycom is expected to benefit from this shift in the communication industry.

Based on this positive forecast for Dycom, Raymond James raised the rating on the stock from ‘outperform’ to ‘strong buy. However, the broker retained its price target on DY of US$120, which is over 40% higher than DY’s closing price on Friday.

Dycom announces 7.1% y-o-y growth in contract revenues

Dycom reported its Q2 2023 results for the period concluding on July 29, 2023. In this quarter, contract revenues surged to US$1.042 billion, indicating a 7.1% increase over the previous corresponding period.

Non-GAAP Adjusted EBITDA for the quarter reached US$130.8 million, representing 12.6% of contract revenues, as opposed to the year-ago quarter where it was US$104.7 million, or 10.8% of contract revenues.

In terms of net income for the quarter, it stood at US$60.2 million, equivalent to US$2.03 per common share diluted, in contrast to the year-ago quarter when it was US$43.9 million, or US$1.46 per common share diluted.

The company anticipates that organic contract revenues for the quarter concluding on October 28, 2023, will align with the contract revenues recorded for the quarter ending on October 29, 2022. Furthermore, the company foresees approximately $30 million in acquired contract revenues for the quarter concluding on October 28, 2023.

Brokers expect a 48% upside potential on DY

EODHD/Others data reveals that the consensus mean price target on DY is US$125.22, a potential increase of around 48% over Friday’s closing price. Meanwhile, the mean recommendation rating on DY is 1.8 on five. Here, one indicates a ‘strong buy’ rating and five shows a ‘strong sell’ rating.

The data also shows that a total of 9 analysts have covered DY. Among these, three believe DY to be a ‘strong buy’, five recommend a ‘buy’ rating and one analyst gave DY a ‘hold’ rating.

Broker Wells Fargo also raised its rating on DY to ‘overweight’ on October 8, 2023. The price target given by the broker was US$120. Additionally, Craig Hallum had raised its rating on DY to ‘buy’ in late August and had given DY a price target of US$124.

Meanwhile, B Riley downgraded the stock to a ‘neutral’ rating in late September.

DY Price Chart; Source: EODHD/Others

DY closed at US$84.65 on Friday, ending trade around 10% lower on a YTD basis.