Kaufman Brothers Cuts Dycom to 'Hold'

Analyst Erik Warren says the loss of Adelphia projects will impact both revenue growth and operating margins

Kaufman Brothers downgraded Dycom (DY ) to hold from accumulate, and suspended its price target.

Analyst Erik Warren says that yesterday, the company announced that Adelphia suspended projects on its network. The loss of ADLAE projects will impact both revenue growth and operating margins, he says. This will delay resumption of revenue growth for one to two quarters, he notes. He also believes margin pressure will stem from the restructuring of operations related to ADLAE and the loss of high-margin upgrade work.

He thinks the suspension of work adds additional uncertainty to the company's already clouded outlook. He sees EPS of $0.53 in fiscal year 2002 (July) and $0.75 in fiscal year 2003. He had a $20 price target.

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