Dycom (DY) Higher On Big Earnings Beat; Worth Keeping On Radar As Infrastructure Play
3:35 pm Tuesday, November 23rd, 2021
Dycom (NYSE:DY) is trading sharply higher today after the company reported Q3 (Oct) results this morning. In addition to highlighting its earnings, we also wanted to flag Dycom as a lesser-known infrastructure play. It’s set to benefit from increased funding for broadband deployment in rural/underserved areas.
Dycom provides contracting services to various utilities and telecom/cable providers, serving as a major installer of fiber optic, copper, and coaxial cable systems. Telecom companies farm out the installation process to Dycom, which takes care of getting all the necessary permits, digging the trenches, and more. Dycom also provides tower construction, lines, and antenna installation for wireless carriers.
In Q3, Dycom reported a huge EPS and revenue beat. This followed three EPS misses in a row, so it was a welcome change.
Dycom did not provide specific guidance, and its business can be lumpy, so analysts are always left a bit in the dark when preparing their models. Also, Dycom has been dealing with labor shortages and higher labor costs. However, this quarter was a very good one for Dycom. A key driver was telephone companies’ deployment of fiber-to-the-home to enable 1GB high speed connections, including in rural areas.
Wireless construction is picking up thanks to newly available spectrum bands; further increases are expected next year. Also, federal and local governments are dramatically boosting the scale of wireless towers near roads. Cable operators are deploying fiber to small and medium businesses in anticipation of capacity expansions next year. Dycom is also benefiting as customers consolidate contractors to reduce the number they work with, which bodes well for big players like Dycom.
Dycom talked about the recently passed infrastructure bill, which includes $40 bln for broadband expansion into rural/underserved areas. Dycom describes the funding as an “unprecedented level of support.” Operators are provisioning 1GB network speeds to customers. Dycom benefits because it provides program management, planning, engineering, and design services. Its largest customers are Verizon, AT&T, Lumen (formerly CenturyLink), and Comcast.
