Dycom Shares Initiated With Overweight Rating, $87 Target At Stephens

Stephens’ Matt Duncan believes that Dycom Industries, Inc. DY is well positioned to benefit from the emerging multi-year telecommunications investment cycle.

The analyst initiated coverage of the company with an Overweight rating and price target of $87.

Well Positioned

“The Company operates in a fragmented industry and has expanded its geographic scope and service offerings both organically and through numerous acquisitions to become the nation's premier, pure-play telecommunications E&C company,” Duncan mentioned.

Dycom Industries’ scale and operational experience has helped drive meaningful revenue growth, margin expansion and increase in backlog through 2015.

Duncan believes that the company is well positioned to benefit for the next several years, “as telecommunications and cable companies deploy large amounts of capital to upgrade their infrastructure to meet the increasing data demands of their customers.”

Telecom Investment Cycle

The analyst noted that the foundation of a meaningful telecommunications investment cycle had been laid.

Dycom Industries’ backlog grew 69 percent year on year to $5.056 billion by the end of 2Q16, from $2.916 billion in 2Q15, driven by longer duration project bookings.

AT&T Inc. T, Dycom Industries’ largest customer, announced plans in December 2015 to deploy 1 gigabit internet access to an additional 38 metropolitan areas, apart from the current 20 areas.

Other blue-chip customers have also announced plans to “significantly expand 1 gigabit networks across the nation,” Duncan stated, while adding that the company was already providing 1 gigabit deployment services and was likely to win more 1 gigabit awards in future.