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Tetra Tech Bullish on Record Backlog, Buyouts Hold Promise
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We issued an updated research report on Tetra Tech, Inc. (TTEK - Free Report) on Dec 9, 2016. Headquartered in Pasadena, CA, Tetra Tech is a leading provider of consulting, construction management, engineering, program management and technical services.
Tetra Tech’s shares have had a solid run in recent times, owing to its impressive top-line growth, restructuring efforts and accretive acquisitions. Year to date, the company’s shares have recorded a remarkable average return of 66.8%, outperforming the Zacks categorized Pollution Control industry average return of 46.9%.
Also, the company has not missed earnings estimates in the trailing nine quarters, which is an impressive feat. In its recently reported fourth-quarter fiscal 2016 results, TE Connectivity’s earnings came in line with the Zacks Consensus Estimate and climbed 18% from the prior-year tally. Strong top-line growth and improved operating efficiency drove earnings growth. The company’s consistent cost control and productivity improvements also reflected in the quarter’s earnings.
Tetra Tech’s long-term growth blueprint involves focusing on four growth markets, water, environment, infrastructure and energy. In short, it is investing in markets that are rapidly undergoing technological changes, witnessing adoption of new regulations and strong investments. Additionally, the company is pursuing strategic midstream activities instead of loss-making upstream activities to overcome the volatility in the oil & gas markets.
Moreover, the company’s acquisition pipeline is quite remarkable. The buyout of Sydney-based consulting and engineering firm – Coffey International – and Virginia-based IT solutions firm – INDUS Corporation – are expected to act as key growth catalysts for Tetra Tech, going forward. While the Coffey acquisition has enabled Tetra Tech to obtain work across international development funding agencies like USAID, UKAID with a combined annual budget of over $90 billion, the INDUS Corporation buyout is proving to be conducive to smart-water services expansion.
Further, the company’s total backlog from ongoing operations (which is the best indicator of future revenue streams) reached a record high of $2.4 billion in the fiscal fourth quarter. This indicated a remarkable jump of 25% year over year, driven by a large number of single-award contracts from USAID and Department of Defense.
Moving ahead, we believe that Tetra Tech has a solid base for future growth, driven by its strong backlog levels, along with a robust pipeline with major government organizations like the U.S. Department of State, U.S. Army Corp. of Engineers and U.S. Air Force awarding it billion-dollar deals. The company believes that solid pipeline of projects in the Department of Defense and development-related services, in both the U.S. and overseas, will continue to propel the growth of its federal business.
In fact, Tetra Tech is quite bullish about its end market prospects in 2017. The company expects the U.S. state and local clients, in both municipal water and smart water services domains, to be its strongest growth drivers in the upcoming quarters. In fact, the business from these clients is expected to grow in the range of 7–12% during the year of 2017. Also, it expects U.S. federal work to be about a quarter of the overall business and grow at a rate of 5–10% for the year.
Its international revenues are anticipated to grow in the range of 5–10%, primarily driven by Canada and the Asia Pacific region. Finally, growth of the U.S. commercial business is estimated to be fuelled by the robust pipeline of projects in environmental, industrial water treatment and cleanup areas.
However, Tetra Tech’s revenues and profitability have been periodically affected by concerns including decreased consumer confidence, the lingering effects of international conflicts, energy costs and inflation. The recent presidential election in the U.S. marks a new beginning for the country and major changes in the government’s plan relating to infrastructure spending can prove to be a drag on the company’s future profitability.
In addition, demand for Tetra Tech’s services is cyclical, and vulnerable to economic downturns and reductions in government and private industry spending. Further, the company’s growth remains dependent on crucial factors like economic growth, government fiscal conditions and client spending, which can harm its operations if they take a turn for the worse.
Despite such headwinds, we believe that this Zacks Rank #3 (Hold) company has several growth drivers in place for the upcoming quarters.
Stocks to Consider
Better-ranked stocks in the broader sector include EnerSys (ENS - Free Report) , II-VI Inc. and Applied Industrial Technologies Inc. (AIT - Free Report) . While EnerSys and II-VI boast a Zacks Rank #1 (Strong Buy), Applied Industrial Technologies carries a Zacks #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EnerSys has surpassed earnings estimates thrice in the trailing four quarters, with an average beat of 3%.
II-VI Incorporated has registered a remarkable positive average surprise of over 39.8% for the four trailing quarters, driven by four strong consecutive earnings beats.
Applied Industrial Technologies managed to beat estimates twice over the trailing four quarters and has a positive earnings surprise of 4.9%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
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Tetra Tech Bullish on Record Backlog, Buyouts Hold Promise
We issued an updated research report on Tetra Tech, Inc. (TTEK - Free Report) on Dec 9, 2016. Headquartered in Pasadena, CA, Tetra Tech is a leading provider of consulting, construction management, engineering, program management and technical services.
Tetra Tech’s shares have had a solid run in recent times, owing to its impressive top-line growth, restructuring efforts and accretive acquisitions. Year to date, the company’s shares have recorded a remarkable average return of 66.8%, outperforming the Zacks categorized Pollution Control industry average return of 46.9%.
Also, the company has not missed earnings estimates in the trailing nine quarters, which is an impressive feat. In its recently reported fourth-quarter fiscal 2016 results, TE Connectivity’s earnings came in line with the Zacks Consensus Estimate and climbed 18% from the prior-year tally. Strong top-line growth and improved operating efficiency drove earnings growth. The company’s consistent cost control and productivity improvements also reflected in the quarter’s earnings.
Tetra Tech’s long-term growth blueprint involves focusing on four growth markets, water, environment, infrastructure and energy. In short, it is investing in markets that are rapidly undergoing technological changes, witnessing adoption of new regulations and strong investments. Additionally, the company is pursuing strategic midstream activities instead of loss-making upstream activities to overcome the volatility in the oil & gas markets.
Moreover, the company’s acquisition pipeline is quite remarkable. The buyout of Sydney-based consulting and engineering firm – Coffey International – and Virginia-based IT solutions firm – INDUS Corporation – are expected to act as key growth catalysts for Tetra Tech, going forward. While the Coffey acquisition has enabled Tetra Tech to obtain work across international development funding agencies like USAID, UKAID with a combined annual budget of over $90 billion, the INDUS Corporation buyout is proving to be conducive to smart-water services expansion.
Further, the company’s total backlog from ongoing operations (which is the best indicator of future revenue streams) reached a record high of $2.4 billion in the fiscal fourth quarter. This indicated a remarkable jump of 25% year over year, driven by a large number of single-award contracts from USAID and Department of Defense.
Moving ahead, we believe that Tetra Tech has a solid base for future growth, driven by its strong backlog levels, along with a robust pipeline with major government organizations like the U.S. Department of State, U.S. Army Corp. of Engineers and U.S. Air Force awarding it billion-dollar deals. The company believes that solid pipeline of projects in the Department of Defense and development-related services, in both the U.S. and overseas, will continue to propel the growth of its federal business.
In fact, Tetra Tech is quite bullish about its end market prospects in 2017. The company expects the U.S. state and local clients, in both municipal water and smart water services domains, to be its strongest growth drivers in the upcoming quarters. In fact, the business from these clients is expected to grow in the range of 7–12% during the year of 2017. Also, it expects U.S. federal work to be about a quarter of the overall business and grow at a rate of 5–10% for the year.
TETRA TECH NEW Price and Consensus
TETRA TECH NEW Price and Consensus | TETRA TECH NEW Quote
Its international revenues are anticipated to grow in the range of 5–10%, primarily driven by Canada and the Asia Pacific region. Finally, growth of the U.S. commercial business is estimated to be fuelled by the robust pipeline of projects in environmental, industrial water treatment and cleanup areas.
However, Tetra Tech’s revenues and profitability have been periodically affected by concerns including decreased consumer confidence, the lingering effects of international conflicts, energy costs and inflation. The recent presidential election in the U.S. marks a new beginning for the country and major changes in the government’s plan relating to infrastructure spending can prove to be a drag on the company’s future profitability.
In addition, demand for Tetra Tech’s services is cyclical, and vulnerable to economic downturns and reductions in government and private industry spending. Further, the company’s growth remains dependent on crucial factors like economic growth, government fiscal conditions and client spending, which can harm its operations if they take a turn for the worse.
Despite such headwinds, we believe that this Zacks Rank #3 (Hold) company has several growth drivers in place for the upcoming quarters.
Stocks to Consider
Better-ranked stocks in the broader sector include EnerSys (ENS - Free Report) , II-VI Inc. and Applied Industrial Technologies Inc. (AIT - Free Report) . While EnerSys and II-VI boast a Zacks Rank #1 (Strong Buy), Applied Industrial Technologies carries a Zacks #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EnerSys has surpassed earnings estimates thrice in the trailing four quarters, with an average beat of 3%.
II-VI Incorporated has registered a remarkable positive average surprise of over 39.8% for the four trailing quarters, driven by four strong consecutive earnings beats.
Applied Industrial Technologies managed to beat estimates twice over the trailing four quarters and has a positive earnings surprise of 4.9%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>