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Dycom Well Positioned To Capitalize On Market Opportunity

D.A. Davidson reiterated its Buy rating on Dycom Industries, Inc. DY, saying the company is well positioned to leverage the market opportunity created by carrier spending.

Carriers are investing to increase connection speeds, with many looking for 1GB/second standards in metro markets while the government is also providing incentives to encourage better Internet access in rural areas.

"Although reports have indicated that some carriers may look to increase utilization of wireless networks to reach customers, these "wireless" networks are typically over 90% hard wired. We expect market demand to continue to grow over the next several years as the current build-out is still in the early stages," analyst John Rogers wrote in a note.

Rogers noted that Dycom is among the best positioned to take advantage of this cycle as "customers are likely to push to consolidate supply chains and focus on contractors that can operate across local and regional markets."

The analyst's first quarter EPS expectation of $1.57 (up from $1.53) is within management's guidance range for EPS of $1.47-$1.62 GAAP and $1.55-$1.70 adjusted. Roger also raised his FY17 EPS estimate by $0.10 to $5.05 and revenue forecast by $95 million to $3.14 billion.

"Based on the current and continuing revenue and earnings momentum, we look for these shares to appreciate to $110 over the next 12-18 months, or 18x our FY18 EPS estimate ($6.00)," Rogers added.

At time of writing, shares of Dycom fell 2.63 percent to $82.81.

Aug 2016FBR CapitalMaintainsOutperform
Apr 2016Canaccord GenuityInitiates Coverage onBuy
Apr 2016Stephens & Co.Initiates Coverage onOverweight

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