Dycom (DY) is trading sharply higher (+19%) today after reporting Q1 (Apr) results. In case you're not familiar, Dycom is a provider of contracting services to various utilities, including telecom/cable providers and electric and gas utilities primarily in North America.
For example, it's a big installer 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 and digs the trenches etc. Dycom also provides maintenance services. Dycom also provides tower construction, lines, and antenna installation for wireless carriers. It also installs and maintains customer premise equipment such as cable set top boxes and modems.
In its 10-K filing, Dycom lists its top customers as: AT&T (21.2% of FY19 contract revenue), Comcast (20.8%), Verizon (19.2%), CenturyLink (13.6%), and Windstream (3.6%). A key driver for Dycom has been telcos/cable operators racing to put in higher bandwidth 1GB networks that can handle intense video streaming as services like Netflix and Hulu become more popular.
Turning to the Q1 (Apr) results, non-GAAP EPS fell 18% yr/yr to $0.53, but that was much better than expected and at the high end of prior guidance of $0.34-0.56. Revenue rose 20.8% yr/yr to $833.7 mln, which was well above prior guidance of $750-800 mln. Looking ahead to Q2 (Jul), Dycom expects EPS of $0.70-0.92 and revenue of $835-885 mln, both of which are in-line with market expectations.
On the call, CEO Steve Nielsen said that "[f]iber deployments and contemplation of emerging wireless technologies are underway in many regions of the country. Wireless construction activity in support of expanded coverage and capacity has begun to accelerate through the deployment of enhanced macro cells and new small cells. Telephone companies are deploying fiber to the home to enable 1-gigabit high speed connections. Cable operators are deploying fiber to small and medium businesses and enterprises."
In sum, this was a nice bounce-back quarter for Dycom. The stock gapped down in late February when the company reported a miss and guided well below expectations for Q1 (Apr). However, the quarter turned out to not be as bad as Dycom had expected it to be. While Dycom's quarterly results can be lumpy, we think it's a name to keep on the radar as a lesser known play on fiber/5G deployments over the coming years. The build out to 1GB sounds like it still has a lot of runway ahead of it.