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Tetra Tech, Inc. (TTEK - Analyst Report) recently revised its third quarter 2013 guidance to factor in the impacts of increased restructuring costs from weakness in Eastern Canada and mining. Costs have also increased owing to new findings on certain project claims. During the second quarter earnings call on May 2, 2013, Tetra Tech had mentioned about prevailing weakness in Eastern Canada and mining to adversely impact its business in the upcoming quarters.

Tetra Tech projects these charges to affect the revenue and earnings of all three operating segments. The company now expects revenue for the third quarter (net of subcontractor costs) in the range of $440 million to $490 million. The company expects to incur a loss in the quarter ranging between 30 cents and 50 cents a share, primarily due to the one-time charges that it expects to incur. 

Apart from this, the board of directors authorized a $100 million common stock repurchase program.

Third-quarter restructuring costs are now expected to be $50 million, of which $40 million are non-recurring in nature. The increase in restructuring costs is primarily attributable to downsizing of operations as weak economic conditions hamper project demand. Approximately two-thirds of the costs are related to Eastern Canada operations, while about one-third is related to its mining operations. Depending on these expected costs, Tetra Tech will calculate its goodwill impairment charge and will inform investors during the third quarter earnings release.       

Tetra Tech’s restructuring initiatives are promising as they are in line with the changes in the market. Right-sizing its operations may help the company to return to its historical profit levels and improve margins.

In addition, Tetra Tech received unfavorable findings primarily associated with claims on four programs during the quarter. Tetra Tech will thus record a charge while continuing with the dispute resolution processes. These claims are related to change orders for certain U.S. federal and state government projects that are facing budget constraints. These charges are expected to total around $45 million.  

During the second quarter earnings release, Tetra Tech had lowered its fiscal 2013 earnings per share and revenue guidance. For fiscal 2013, earnings per share are expected to be in the range of $1.60 to $1.75, down from its prior guidance of $1.85 to $1.96. Management also lowered its upper end of revenue guidance and pegged revenue, net of subcontractor cost, in the range of $2.15 billion to $2.25 billion compared with its prior guidance of $2.15 billion to $2.35 billion.  

Tetra Tech currently has a Zack Rank #3 (Hold). Some other companies in the industry worth mentioning are CECO Environmental Corp. (CECE - Snapshot Report), having a Zacks Rank #1 (Strong Buy), and Calgon Carbon Corporation (CCC - Analyst Report) and Orion Marine Group Inc. (ORN - Snapshot Report), each carrying a Zacks Rank #2 (Buy).

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