Dycom Eyes $275M Revenue Boost With $150M Black & Veatch Deal

Dycom Industries, Inc. DY has strategically positioned itself for significant growth with the acquisition of Black & Veatch's public carrier wireless telecommunications infrastructure business for $150 million. This acquisition is Dycom's largest ever in the wireless services space, underlining its strategic importance in strengthening its capabilities in wireless construction services.

The acquisition expands Dycom's geographic presence, particularly in states like New York, New Jersey, Missouri, Kansas, Colorado, Utah, Wyoming, Idaho, and Montana and provides the company with a stronger presence in these high-demand regions. This expansion is not just about increasing Dycom's reach but also about diversifying its service offerings. The expansion allows Dycom to more broadly address growth opportunities in wireless network modernization, including Open RAN transformation initiatives and deployment services. With the ongoing transformation of wireless networks, including initiatives like Open RAN, Dycom is now better equipped to meet the evolving needs of its customers.

Financially, this acquisition is a win for Dycom. The newly acquired business is expected to contribute between $250 million and $275 million in contract revenues by fiscal 2026. This forecast underscores the acquisition's potential to significantly enhance Dycom's top-line growth and market position in the competitive telecommunications infrastructure sector. Notably, the acquisition is anticipated to add approximately $1 billion to Dycom's total backlog, further solidifying the company's future revenue potential and workload.

In summary, Dycom's acquisition of Black & Veatch's wireless business is a strategic move that not only expands its market reach but also positions the company to capitalize on the growing opportunities in wireless network modernization, making it a promising investment.

Telecommunication Business for Dycom

Since the past few quarters, the company's top line benefited immensely from the extensive deployment of 1-gigabit wireline networks by major customers. Dycom's top five customers combined contributed to 54.9% of total revenues in the second quarter of fiscal 2025, with organic growth of 7.1% from these customers. The deployment of gigabit wireline networks, wireless/wireline converged networks, and wireless networks was a key driver behind this growth.

Dycom expects continued strong demand for gigabit wireline and converged wireless/wireline networks. The company emphasized that the appetite for massive fiber deployments is "irreversible" driven by the increasing need for high-capacity networks to support consumer and business broadband services.

Recent DY Stock Performance

This Florida-based specialty contracting service provider's stock has rallied 56% so far this year, compared with the Zacks Building Products - Heavy Construction industry's 58.3% growth. It has also handily outpaced the Zacks Construction sector's 14.1% rise and the S&P 500 Index's 17.5% increase in the same time frame.

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Notably, several areas could be perceived as potential negatives or challenges for the company. DY projected a potential deceleration in organic revenue growth for the fiscal third quarter. While the fiscal second quarter saw 9.2% organic growth, expectations for the fiscal third quarter were mid-to-high single-digit growth. This slowdown was partly due to tougher comparisons from the prior year, where there were significant change orders and project closeouts that boosted revenues.

Also, the company mentioned that August had been a particularly wet month, which could impact operational efficiency and potentially slow down project execution in the fiscal third quarter. This weather factor was specifically noted as a reason for providing more conservative guidance.

Nonetheless, the company also anticipates a slight increase in non-GAAP adjusted EBITDA margins, reflecting continued operational efficiency and integration of recent acquisitions for the fiscal third quarter.

Overall, Dycom's outlook is positive, with the company positioned to capitalize on ongoing network deployments and government-funded broadband expansion initiatives. The combination of strong customer demand, strategic acquisitions, and a stable economic environment is expected to drive sustained growth in the coming quarters.

Zacks Rank & Other Key Picks

Currently, DY carries a Zacks Rank #2 (Buy).

Here are some other top-ranked stocks from the Zacks Construction sector:

Howmet Aerospace Inc. presently sports a Zacks Rank #1 (Strong Buy). HWM has a trailing four-quarter earnings surprise of 10.9%, on average. Shares of the company have gained 77.8% year to date (YTD).

The Zacks Consensus Estimate for HWM's 2024 sales and EPS indicates a rise of 12.6% and 39.1%, respectively, from the prior-year levels.

Sterling Infrastructure, Inc. presently carries a Zacks Rank #2. Sterling Infrastructure has a trailing four-quarter earnings surprise of 17.4%, on average. Shares of the company have gained 30.5% YTD.

The Zacks Consensus Estimate for STRL's 2024 sales and EPS indicates a rise of 9.7% and 26.6%, respectively, from the prior-year levels.

Quanta Services Inc. presently carries a Zacks Rank #2. PWR has a trailing four-quarter earnings surprise of 4.6%, on average. Shares of the company have gained 24.8% YTD.

The Zacks Consensus Estimate for PWR's 2024 sales and EPS indicates a rise of 14.2% and 18.3%, respectively, from the prior-year levels.

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