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Dycom (DY) Rises 104% in 6 Months: Will the Rally Continue?

Dycom (DY) Rises 104% in 6 Months: Will the Rally Continue?

Dycom Industries Inc. DY has been riding high on strong prospects in the telecommunication business, continuous contract wins and solid backlog. Earnings estimates for fiscal 2021 and 2022 have moved 6.4% and 0.9% north in the past 30 days, depicting bullish analysts’ sentiments.

Shares of this specialty contracting firm have rallied 104.1% over the past six months, outperforming the Zacks Building Products – Heavy Construction industry’s 26.9% growth.

This Zacks Rank #1 (Strong Buy) stock has also outperformed the Zacks Construction sector and S&P 500 Index’s 47.7% and 22.9% rally, respectively, in the said time frame. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Factors Narrating Dycom’s Growth Story

Strong Prospects in Telecommunication Business: Accounting for 90.8% of contract revenues, Dycom’s Telecommunication business primarily benefits from increased demand for network bandwidth and mobile broadband, given the proliferation of smart phones. As telecommunication networks face increased demand, customers need to expand the capacity and improve the performance of existing networks and in certain instances, deploy new networks. Presently, a number of major industry participants are deploying significant wireline networks to offer bandwidth-enabling 1-gigabit speeds, thereby creating significant opportunities for Dycom.

In the last few quarters, the company’s top line benefited immensely from extensive deployment of 1-gigabit wireline networks by major customers. Dycom remains optimistic about the strengthening industry environment, given strong end-market drivers. Although the recent market trend is a concern, telecommunication networks that are a crucial infrastructure for the country will gain momentum as the effects of the pandemic phase out.

Solid Backlog: Dycom continues to register a stable 12-month backlog despite a challenging economic backdrop. This indicates persistent growth through the next calendar year. The company recorded backlog of $6.441 billion at the end of second-quarter fiscal 2021, almost in line sequentially. Of

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