Dycom Poised To Thrive From AT&T's Positive Outlook: Analyst Upgrades To Strong Buy

Raymond James analyst Frank G. Louthan upgraded Dycom Industries Inc DY to Strong Buy from Outperform and maintained the price target of $120.00.

The analyst is bullish on the stock ahead of Q3 FY23 earnings due to a favorable outlook from one of its major customers, AT&T Inc T.

In the earnings results reported yesterday, AT&T expects full-year adjusted EBITDA growth of better than 4% versus prior guidance of 3%+. The company now expects full-year free cash flow of about $16.5 billion, vs. previous guidance of $16 billion+.

The analyst says AT&T results reflect what other fiber upgrades by telecoms can expect to achieve and continued confidence in the fiber upgrades pace over the next several years. 

Hence, Louthan writes that Dycom is well-positioned to remain one of the most direct beneficiaries of this secular trend, given its leading position as the engineering and construction services provider to such major players.

The real key derivative for Dycom that non-TMT investors should focus on is the growth in fiber revenue of 27% Y/Y and total broadband revenue of 9.8% Y/Y (ARPU growth of 9% Y/Y), says the analyst.

The analyst left Dycom's estimates unchanged, with EPS at $6.64 for FY24 and $6.81 for FY25. 

Also Read: Dycom Amplifies Rural Broadband Service Via Bigham Deal; Plans New $150M Stock Buyback

Price Action: DY shares are trading higher by 4.19% at $85.71 on the last check Friday.