Bad weather lowers Dycom's Q2 revenue forecast to $655.5M

two utility workers setting up a fiber cabinet on a sidewalk
Dycom issued a lower Q2 guidance as its key customers deal with major weather issues. (Image: btphotosbduk / CC BY 2.0).

Dycom says its lower fiscal second-quarter revenue guidance is directly tied to widespread adverse weather conditions and the ramp-up of several large customer programs in the quarter that ended on Jan. 27.

As a result, Dycom now expects revenue of $655 million, down from its previous guidance of $645-675 million. The company, which counts AT&T, Verizon and CenturyLink as its largest customers, also forecast diluted earnings per share (EPS) of 9 to 12 cents, which is also lower than its prior guidance of 24-36 cents.

“Widespread adverse weather reduced the number of available workdays and negatively impacted productivity and margins during the quarter ended January 27, 2018. Margins were also impacted by costs incurred in conjunction with the initiation of large customer programs,” Dycom said in a release.

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Dycom will release financial results for its fiscal second quarter on Wednesday, Feb. 28, before trading starts on the New York Stock Exchange.

Jennifer Fritzsche, senior analyst for fiber infrastructure and broadband services, said in a research note that the lower revenue guidance is a “good news/bad new announcement for Dycom.”

“The bad news is that more adverse winter weather conditions (particularly compared to the last 2 years) as well as the ramp-up for several large customer initiations will depress revenues and margins in the January and April 2018 quarters,” Fritzsche said. “On a positive note, the FY2019 guidance implies a significant ramp in revenue growth for the last 3 quarters of its FY2019 (from May 2018 - January 2019). Based on its guidance, DY expects those 3 quarters to collectively be up ~21% over the same 3-quarter period yr/yr.”

The reduction of its effective tax rate from ~37% to ~27.3% will also add to DY's EPS generation.

Besides issuing a lower revenue guidance, Dycom estimated that the recently passed tax reform bill provides a benefit to the company’s income taxes of approximately $31 million, or 98 cents per diluted common share.

Dycom said tax reform “will not impact Non-GAAP Adjusted Diluted Earnings per Common Share” adding that “this benefit primarily resulted from the re-measurement of the Company's net deferred tax liabilities at a lower U.S. federal corporate income tax rate and represents a preliminary assessment of the effect of Tax Reform.”