Dycom Industries upgrades FY 26 contract revenue outlook

Published: 2025-06-23 06:46:31 ET DY

Published on 06/23/2025 at 06:46

By Rachel Harp

Dycom Industries started fiscal 2026 on a strong note, posting an increase in contract revenues, complemented by a record backlog position. Buoyed by the encouraging start, the company has enhanced its full year outlook, underpinning the positive industry tailwinds and robust demand for its service offerings.

Dycom Industries, Inc., incorporated in 1969 in the State of Florida, provides specialty contracting services for telecommunications infrastructure and utility industries across the US. The company has expanded its operations through organic, as well as inorganic means and today is comprised of 40 operating companies, serving a diverse customer base.

The group provides telecommunications providers with a robust portfolio of specialty services, including program management; planning; engineering and design; aerial, underground, and wireless construction; maintenance; and fulfillment services.

The company delivered solid performance during the quarter, posting strong revenue growth and margin expansion. Total contract revenues increased 10.2% y/y to $1,259m, driven primarily on the back of increased revenue from acquired businesses. On an organic basis, contract revenues increased 0.7%. Adjusted EBITDA rose 14.9% to %150.4m, with margins expanding by 49bp to 11.9%.

The company reported a steady increase in backlog over the past year, reaching $8.1bn at end-Q1 26 from $6.4bn at end-Q1 25. The backlog for the next 12 months stands at an impressive $4.7bn, signaling stable revenue opportunities. Employee head count edged marginally higher to 15,708 from 15,689 over the same period.

The sector prospects appear to be bright for Dycom Industries, with increasing amounts of capital being deployed for the operation of high-capacity telecommunications and digital infrastructure. Focus on fiber-to-the home deployments and increasing demand for fiber infrastructure to support AI-enabled data center growth is expected to drive industry demand. In this regard, the company has received a multi-year award from an ISP for middle mile networks, with expected to commence late in FY 26 and revenue ramp up in FY 27.

Encouraged by a strong start to the year and favorable demand outlook, Dycom Industries has increased its FY 26 range of contract revenue outlook. The company now anticipates total contract revenues to range from $5.3bn to $5.4bn, reflecting growth of 12.5%-15.4% y/y, compared to prior expectations of 10%-13% growth.

In Q2 26, the group expects total contract revenues to be between $1.38bn and $1.43bn, while adjusted EBITDA to be between $185m and $200m.

Dycom Industries reported solid top line performance over FY 22-25, posting a CAGR of 14.5% to reach $4.7bn. EBITDA surged at a CAGR of 32.4% to $543m in FY 25, with margins expanding by 4.1% to 11.6%. Net income jumped at 69% CAGR over the same period, reaching $233m in FY 25.

However, the group reported a steady decrease in cash reserves from $311m at end-FY 22 to $92.7m at end-FY 25, owing to elevated capex activities over the period. Total debt rose from $902m to $1.1bn over the same period, however, there has been an improvement in leverage from 119% to 85.2%.

In comparison, Comfort Systems, a local peer, posted better revenue performance with a CAGR of 32% over the past three years, reaching $7bn in FY 24. EBITDA surged at a CAGR of 52% to $892m in FY 24, with margins expanding by 4.4% to 12.7%.

The strong fundamental performance is reflected in the company’s stock performance. Over the past 12 months, the company's stock has delivered solid returns of approximately 40%. In comparison, Comfort Systems delivered returns of 58%.

Despite the shar run-up in the share prices, the company is trading lower compared to Comfort Systems. Dycom Industries is currently trading at a P/E of 24.2x, based on the FY 26 estimated EPS of $9.7, which is lower than that of Comfort Systems (25.7x). However, it is trading higher than its 3-year historical average of 19.7x.

The company is currently trading at an EV/EBITDA multiple of 11.2x, based on FY 26 estimated EBITDA of $681.4m, which is lower than Comfort Systems valuation of 16.7x. However, it is trading higher than its 3-year historical average of 8.9x.

Dycom Industries is liked by nine analysts, all of whom have ‘Buy’ ratings for an average target price of $260.9, implying 11.4% upside potential. Their views are further supported by an anticipated EBITDA CAGR of 12.2% over FY 25-28, reaching $814.2m, with margins of 12.6% in FY 28. In addition, analysts estimate a net profit CAGR of 17.6%, reaching $379.9m with margins of 5.9% in FY 28, with EPS expected to increase to $13.3 in FY 28 from $7.9 in FY 25. Likewise, analysts estimate EBITDA CAGR of 7.8% and net profit CAGR of 15.1% for Comfort Systems.

Overall, the company remains positioned for sustained growth, supported by a record backlog of orders, solid fundamentals and an encouraging outlook. However, Dycom Industries is exposed to some risks, including project execution risks, high leverage, tariff risks, and concentrated customer base. Moreover, the company has significant amount of account receivables and contract assets on its balance sheet, raising prospects of constrained liquidity and cash flows.

Rachel Harp