FYBR - Dycom Industries upgraded to Overweight at Wells Fargo Securities

2023-05-25 13:29:22 ET

Dycom Industries ( NYSE: DY ) on Thursday was upgraded to Overweight from a previous investment rating of Equal Weight by analysts at Wells Fargo Securities. They said the building contractor for fiber-optic networks is poised to benefit from better contract pricing and steady demand for broadband connections to homes.

“We see improving trends from a few key customers, including Brightspeed, Lumen ( LUMN ), Verizon ( VZ ) and Comcast ( CMCSA ),” Eric Leubchow, analyst at Wells Fargo, said in a May 25 report. “We also remain convinced that Dycom ( DY ) is winning share from smaller engineering and construction firms that have been far more impacted by higher construction costs, a tighter labor supply and more limited liquidity.”

Wells Fargo raised its price target for Dycom ( DY ) to $120 a share from a previous target of $105 a share, based on a multiple of 19.5 times next-12-month estimated EPS.

Dycom ( DY ) on Wednesday reported revenue growth of 20% from a year earlier to $1.05 billion in Q1. Net income more than doubled to $51.5 million, or $1.73 a share, from $19.5 million, or $0.65 a share, a year earlier. Analysts had forecast EPS of $0.70 for Q2.

“Dycom ( DY ) cited two customers who have front-end-loaded capex this year, which we believe are AT&T ( T ) and Frontier Communications Parent ( FYBR ),” Wells Fargo said. “AT&T ( T ) was the lone major detractor to year-over-year growth (-5.5% year/year), although we expect AT&T ( T ) comps to improve into calendar year 2024 as we start to see modest contribution from the GigaPower JV which recently closed. Frontier ( FYBR ) may have slower sequential volume growth this year, but contract pricing has likely improved and passings are expected to grow 15% next year.”

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