Dycom Industries (NYSE:DY) Revenue, Earnings Growth to Accelerate

Dycom Industries (NYSE:DY) was added to the "Top Pick" list of FBR Capital, which said they see revenue and earnings growth accelerating in the years ahead.

FBR says, "Over the past six months, numerous fundamental
developments have raised our confidence that Dycom is back on track for accelerating revenue and earnings growth over the coming years, including: (1) two quarters of accelerating backlog growth (12-month backlog is up 16% YOY); (2) a broadening customer base that should provide a catalyst to higher profit margin; (3) recent aggressive share repurchases and debt refinancing; and (4) a recent wireless acquisition, adding a new growth opportunity. Although the current quarter is seasonally the weakest, and as such we are not making a call per se on the January quarter, we believe investors should look through the winter months and aggressively build a position in Dycom to benefit from accelerating growth at an attractive valuation multiple.

"We have raised our FY11 revenue and EPS estimate to $1,050M (from $1,038M) and $0.46 (from $0.45), and introduced FY12 estimates including revenue of $1,146M (+9% YOY) and EPS of $0.70 (+53% YOY)."

FBR Capital reiterates an "Outperform" rating on Dycom Industries, which closed Tuesday at $16.56, gaining $0.69, or 4.35 percent. FBR raised their price target on Dycom from $21 to $24.

Dycom Industries (NYSE:DY) Adds Another Growth Vehicle to its Stable of Products

The acquisition of NeoCom Solutions by Dycom Industries (NYSE:DY) has given it another stream for growth in the future, and it comes at the right time.

FBR noted, "To our surprise, Dycom is expanding into the wireless construction market through the announced acquisition of NeoCom Solutions, based in Woodstock, GA. Given Dycom's significant presence across the Southeast, this acquisition appears to be very strategic and timely as we anticipate a steady up-tick in wireless capex activity over the coming years. We reiterate our Outperform rating on the shares of Dycom noting its attractive valuation, corporate share repurchase actions over the past few months, recent inflection point of backlog growth and organic revenue growth, and now acquisitions positioning the company for strategic spending initiatives.

"Over the long-term, we could see this acquisition become the beginning of a much larger move into wireless across the US. Lastly, this acquisition adds another dynamic growth opportunity for Dycom, complimenting developing opportunities, such as: 1) rural broadband, 2) fiber to the tower, 3) customer consolidation and upgrade (ie CenturyLink's iPTV initiative, and Frontier's capital investment program following purchase of VZ access lines), 4) cable metro ethernet investment, and 5) an eventual rebound in the residential housing market."

FBR Capital maintains an "Outperform" rating on Dycom Industries, which closed Monday at $14.83, gaining $0.35, or 2.42 percent.

Fluor (NYSE:FLR) Jacobs Engineering (NYSE:JEC), URS (NYSE:URS) Should Give Solid Returns in 2011

Believing the recent rebound in engineering and construction stocks is sustainable, FBR Capital has their strongest picks in the sector as Fluor (NYSE:FLR) Jacobs Engineering (NYSE:JEC) and URS (NYSE:URS).

FBR:

Engineering & Construction (E&C): "Stocks have started to rally over the past month (+15% since October 29 versus the S&P at +5%), which we believe is the beginning of a much longer cycle. Backlog has started to improve. We expect the oil & gas market to redevelop, the domestic power market to witness opportunities, federal spending to be constant, and state/local to remain unclear. Finally, strong balance sheets should limit downside risk and possibly enhance EPS growth through share repurchases and M&A. As our 2010 FBR Top Pick, Fluor (Outperform) is up 39% year to date, we believe Jacobs Engineering (Outperform) and URS Corp. (Outperform) should provide solid returns in 2011.

Specialty Contracting. "In 2011, we expect revenue growth to redevelop broadly and be complemented by improving profit margins. Emerging trends include: improving telecommunications (wireless and wireline) capex, a pickup in electric transmission coupled with a more stable electric distribution market, and a steadily improving economy that should eventually lead to a pickup in the housing market and commercial construction. M&A activity and share buybacks should also enhance growth in 2011. Our favorite small-cap specialty contractors for 2011 include Dycom Industries (NYSE:DY)(Outperform), EMCOR Group (NYSE:EME)(Outperform), MYR Group (Nasdaq:MYRG)(Outperform), and UniTek (Nasdaq:UNTK)(Outperform)."

Flour closed Thursday at $63.15, up $1.84, or 3.00 percent. Jacobs closed at $42.48, up $0.42, or 1.00 percent. URS ended the session at $43.09, up $0.53, or 1.25 percent.

Fluor (NYSE:FLR) Jacobs Engineering (NYSE:JEC) and URS (NYSE:URS)

Dycom (NYSE:DY), MasTec (NYSE:MTZ) Organic Growth Looks Strong

Reporting on a field trip they made to Dycom (NYSE:DY) and MasTec (NYSE:MTZ), withing the Diversified Industrials/Specialty Contracting. FBR Capital said they came away with a positive outlook for Dycom (NYSE:DY) and MasTec (NYSE:MTZ) within the sector.

FBR said, "Last week, we hosted a field trip to visit the management teams of Dycom Industries and MasTec. We walked away from the meetings with high conviction that business opportunities will accelerate in 2011 across a number of end markets, including wireline and wireless telecommunications, and electric transmission. An important characteristic of the improvement expected in this cycle is that the breadth of opportunities, which is across many customers, is providing greater project selectivity, which in turn should provide favorable pricing and margin expansion. In addition, much of the growth appears to be through multiyear programs, which improves long-term visibility for the contractors. The valuations also remain attractive relative to historical levels, particularly given growth prospects. DY currently trades at 4.5x CY2011 EV/EBITDA, versus its historical average of 8.5x. MTZ currently trades at 6.0x estimated 2011 EV/EBITDA (inclusive of earnout liability), versus the peer historical average of around 10x. Given the improving prospects for organic revenue growth, we expect valuation multiples to expand back to historical levels."

Dycom closed Tuesday at $14.62, up $0.23, or 1.60 percent. MasTec closed at $14.04, down $0.29, or 2.02 percent.

Buy Shares of Dycom Industries (NYSE:DY) Says FBR

Saying a cyclical upswing has come in reference to Dycom Industries (NYSE:DY), FBR Capital says it's now time to buy shares of the stock.

FBR said, "It is time to buy shares of Dycom going into a cyclical upswing in communications capital spending. DY's F1Q11 results offered numerous fundamental data points that confirm to us our increasingly upbeat outlook...We reiterate our rating as we believe numerous growth opportunities are developing, solid cash generation during the recent recession provides a solid balance sheet for the up-cycle in communication capex, and the valuation is very attractive...We expect CY11 revenue of $1.08B (+ 8% YOY), EBITDA of $101M (+23%), and EPS of $0.50 (+51%)."

FBR maintains their "Outperform" rating on Dycom, which closed at $13.22 on Tuesday, gaining $0.19, or 1.46 percent. FBR raised their price target on them from $15 to $21.