Dycom Reminds Us Infrastructure Spending Is More Than Roads and Bridges
Communications Infrastructure spending that benefits United Rentals, Vulcan and Marvell has a long way to go.
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* Dycom Industries highlights another aspect of infrastructure demand for United Rentals, Vulcan Materials, and Marvell.
* A successful test of support levels for United Rentals and Vulcan shares could prompt some small share-buying.
Last night specialty contractor Dycom DY which focuses on wireline, wireless, and broadband infrastructure reported its quarterly results. Comments made in the company’s earnings release and during its earnings conference call point to another driver of demand for United Rentals URI and Vulcan Materials VMC, as well as Marvell MRVL.
During the April quarter, Dycom’s revenue rose $9.3% year over year to $1.142 billion as it deployed gigabit wireline networks, wireless wireline converged networks, and wireless networks for the likes of AT&T T, Lumen LUMN, Comcast CMCSA, Verizon VZ and others.
Management pointed out that to date only about $6 billion of the $40 billion earmarked for the construction or upgrade of wireline networks to provide gigabit network speeds as part of the Infrastructure Investment and Jobs Act, have received initial proposal approval. That tells us there is much more funding and construction activity to come.
While many tend to focus on infrastructure spending on roads, bridges, and the like, this ramping aspect of the Infrastructure Act points should help drive rental fleet utilization levels at United Rentals and demand for construction-related aggregates at Vulcan. Helping support that view, of Dycom’s $6.364 billion backlog exiting April, roughly $3.863 billion is expected to be delivered in the next 12 months and supported its topline guide for the current quarter to rise high-single digits.
On the topic of AI and data centers, Dycom said that anything that increases demands on the network is historically been good for its business because of the incremental capital spending. That speaks to our view that AI adoption, including AI-on-device, should reaccelerate demand for Marvell’s Networking and Carrier Infrastructure business.
Both URI and VMC shares are in the process of testing their respective 100-day and moving averages near $658 and $253, respectively. Successful tests of those support levels would be a consideration in adding a small bit further to both of those positions subject to what we learn in the Fed Beige Book and the market’s reception to it.
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At the time of publication, TheStreet Pro Portfolio was long URI, VMC and MRVL.
