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After two back-to-back quarters of meeting earnings estimates, Tetra Tech Inc. (TTEK - Free Report) reported first-quarter fiscal 2017 adjusted earnings from ongoing operations of 49 cents, beating the Zacks Consensus Estimate by 4.3%. Earnings exceeded the company’s guided range of 44–48 cents.
Tetra Tech fared even better year over year, with adjusted earnings up 17% from the prior-year quarter’s tally of 42 cents. The company’s earnings benefited from robust top-line growth. Also, operating efficiency, resulting from cost-management initiatives, proved conducive to the earnings growth.
Inside the Headlines
Net revenue jumped an impressive 18% year over year to $490 million, comfortably beating the Zacks Consensus Estimate of $476 million. Revenues, too, surpassed the upper end of the company’s estimated range of $450–475 million. Moreover, Tetra Tech’s ongoing revenues grew 22% year over year.
The top line was supported by the expansion of the U.S. Federal, municipal and international development projects. Primarily, strong performance of Water, Environment and Infrastructure segment supplemented the quarterly sales performance.
Water, Environment and Infrastructure revenues continued their solid growth trajectory, climbing 12.4% year over year to $201 million. This segment mainly benefited from strong U.S. federal and Infrastructure projects. In fact, the company is hopeful that the new administration could unlock additional opportunities for Tetra Tech in all areas of the U.S. infrastructure.
Also, net revenue from Resource Management and Energy managed robust growth in the quarter, as it went up 9.3% year over year to $287 million. While international development projects drove the sales performance, sluggish oil and gas markets restricted top-line growth.
In the quarter under review, total backlog from ongoing operations reached $2.5 billion, a remarkable jump of 37% year over year, driven by strong orders in the federal and state and local markets.
Additionally, ongoing operating income was up 9% year over year to $42.9 million.
Noteworthy Developments
Concurrent with the earnings release, Tetra Tech announced the acquisition of Eco Logical Australia – a multi-disciplinary consulting firm – which provides innovative, high-end environmental and ecological services. Eco Logical has a sturdy foothold in the Australian environmental space and enjoys a solid reputation of Leading with Science. Eco Logical will help Tetra Tech expand its environmental and water services in the Asia-Pacific region.
Liquidity & Cash Flow
At the end of the quarter, Tetra Tech’s cash and cash equivalents were $127 million, up from $125 million a year ago. Long-term debt was $372.7 million, up from $331.5 million as of Oct 2, 2016.
For the quarter, the company’s cash used in operations came in at $58.7 million, as against cash generated from operations of $23.6 million in the year-ago quarter.
Share Repurchase
Tetra Tech is highly committed toward rewarding its shareholders through dividends and share buyback programs. Last quarter, the company had authorized a new program to repurchase up to $200 million of common stock, under which it has $190 million remaining.
Furthermore, on Jan 30, 2017 Tetra Tech declared a quarterly dividend of 9 cents per share payable on Mar 3 to stockholders of record as of Feb 17.
Outlook
Concurrent with the quarterly earnings release, Tetra Tech provided revenue and earnings guidance for both the upcoming quarter and fiscal 2017. The company expects first-quarter fiscal 2017 earnings per share to be in the range of 42–47 cents. Net revenue for the fiscal second quarter is projected to lie within $450–$480 million.
For fiscal 2017, Tetra Tech reiterated its earlier projections of earnings per share in the band of $2.00–$2.20 on net revenues of $2.0–$2.1 billion.
Tetra Tech, Inc. Price, Consensus and EPS Surprise
Tetra Tech started the year on a high note, with impressive top and bottom-line performance and sturdy year-over-year growth. Strong demand for its services across the core markets of water, environment, and infrastructure continue to drive growth.
The company’s robust backlog levels provide excellent visibility into fiscal 2017 and signal bright days ahead. Moreover, its diligent restructuring initiatives, such as the winding down of the Remediation and Construction Management, to focus on high-growth businesses are proving conducive to top-line growth.
Tetra Tech’s acquisition of Eco Logical Australia should also provide a boost to growth. In addition, the company’s earlier acquisition of leading consulting and engineering firm – Coffey International – based in Sydney has proved to be one of the strongest profit churners. We believe that thriving end markets, including water, environment, and infrastructure and energy; sound financial health; and solid backlog levels will continue to act as strong tailwinds.
Stocks to Consider
Tetra Tech currently carries a Zacks Rank #2 (Buy).Other stocks in the broader sector that are worth a look now, include II-VI Inc. , Vertex Energy, Inc. (VTNR - Free Report) and Applied Industrial Technologies Inc. (AIT - Free Report) . While II-VI boasts a Zacks Rank #1 (Strong Buy), Vertex Energy and Applied Industrial Technologies both carry the same rank as Tetra Tech. You can see the complete list of today’s Zacks #1 Rank stocks here.
II-VI Incorporated has registered a remarkable positive average surprise of 59.2% for the four trailing quarters, driven by strong, consecutive earnings beats throughout.
Vertex Energy has beaten estimates thrice in the preceding four quarters for an average positive surprise of 27.1%.
Applied Industrial Technologies managed to beat estimates thrice over the trailing four quarters and has a positive earnings surprise of 6.2%.
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Tetra Tech (TTEK) Tops Fiscal Q1 Earnings; Backlog Solid
After two back-to-back quarters of meeting earnings estimates, Tetra Tech Inc. (TTEK - Free Report) reported first-quarter fiscal 2017 adjusted earnings from ongoing operations of 49 cents, beating the Zacks Consensus Estimate by 4.3%. Earnings exceeded the company’s guided range of 44–48 cents.
Tetra Tech fared even better year over year, with adjusted earnings up 17% from the prior-year quarter’s tally of 42 cents. The company’s earnings benefited from robust top-line growth. Also, operating efficiency, resulting from cost-management initiatives, proved conducive to the earnings growth.
Inside the Headlines
Net revenue jumped an impressive 18% year over year to $490 million, comfortably beating the Zacks Consensus Estimate of $476 million. Revenues, too, surpassed the upper end of the company’s estimated range of $450–475 million. Moreover, Tetra Tech’s ongoing revenues grew 22% year over year.
The top line was supported by the expansion of the U.S. Federal, municipal and international development projects. Primarily, strong performance of Water, Environment and Infrastructure segment supplemented the quarterly sales performance.
Water, Environment and Infrastructure revenues continued their solid growth trajectory, climbing 12.4% year over year to $201 million. This segment mainly benefited from strong U.S. federal and Infrastructure projects. In fact, the company is hopeful that the new administration could unlock additional opportunities for Tetra Tech in all areas of the U.S. infrastructure.
Also, net revenue from Resource Management and Energy managed robust growth in the quarter, as it went up 9.3% year over year to $287 million. While international development projects drove the sales performance, sluggish oil and gas markets restricted top-line growth.
In the quarter under review, total backlog from ongoing operations reached $2.5 billion, a remarkable jump of 37% year over year, driven by strong orders in the federal and state and local markets.
Additionally, ongoing operating income was up 9% year over year to $42.9 million.
Noteworthy Developments
Concurrent with the earnings release, Tetra Tech announced the acquisition of Eco Logical Australia – a multi-disciplinary consulting firm – which provides innovative, high-end environmental and ecological services. Eco Logical has a sturdy foothold in the Australian environmental space and enjoys a solid reputation of Leading with Science. Eco Logical will help Tetra Tech expand its environmental and water services in the Asia-Pacific region.
Liquidity & Cash Flow
At the end of the quarter, Tetra Tech’s cash and cash equivalents were $127 million, up from $125 million a year ago. Long-term debt was $372.7 million, up from $331.5 million as of Oct 2, 2016.
For the quarter, the company’s cash used in operations came in at $58.7 million, as against cash generated from operations of $23.6 million in the year-ago quarter.
Share Repurchase
Tetra Tech is highly committed toward rewarding its shareholders through dividends and share buyback programs. Last quarter, the company had authorized a new program to repurchase up to $200 million of common stock, under which it has $190 million remaining.
Furthermore, on Jan 30, 2017 Tetra Tech declared a quarterly dividend of 9 cents per share payable on Mar 3 to stockholders of record as of Feb 17.
Outlook
Concurrent with the quarterly earnings release, Tetra Tech provided revenue and earnings guidance for both the upcoming quarter and fiscal 2017. The company expects first-quarter fiscal 2017 earnings per share to be in the range of 42–47 cents. Net revenue for the fiscal second quarter is projected to lie within $450–$480 million.
For fiscal 2017, Tetra Tech reiterated its earlier projections of earnings per share in the band of $2.00–$2.20 on net revenues of $2.0–$2.1 billion.
Tetra Tech, Inc. Price, Consensus and EPS Surprise
Tetra Tech, Inc. Price, Consensus and EPS Surprise | Tetra Tech, Inc. Quote
Our Take
Tetra Tech started the year on a high note, with impressive top and bottom-line performance and sturdy year-over-year growth. Strong demand for its services across the core markets of water, environment, and infrastructure continue to drive growth.
The company’s robust backlog levels provide excellent visibility into fiscal 2017 and signal bright days ahead. Moreover, its diligent restructuring initiatives, such as the winding down of the Remediation and Construction Management, to focus on high-growth businesses are proving conducive to top-line growth.
Tetra Tech’s acquisition of Eco Logical Australia should also provide a boost to growth. In addition, the company’s earlier acquisition of leading consulting and engineering firm – Coffey International – based in Sydney has proved to be one of the strongest profit churners. We believe that thriving end markets, including water, environment, and infrastructure and energy; sound financial health; and solid backlog levels will continue to act as strong tailwinds.
Stocks to Consider
Tetra Tech currently carries a Zacks Rank #2 (Buy).Other stocks in the broader sector that are worth a look now, include II-VI Inc. , Vertex Energy, Inc. (VTNR - Free Report) and Applied Industrial Technologies Inc. (AIT - Free Report) . While II-VI boasts a Zacks Rank #1 (Strong Buy), Vertex Energy and Applied Industrial Technologies both carry the same rank as Tetra Tech. You can see the complete list of today’s Zacks #1 Rank stocks here.
II-VI Incorporated has registered a remarkable positive average surprise of 59.2% for the four trailing quarters, driven by strong, consecutive earnings beats throughout.
Vertex Energy has beaten estimates thrice in the preceding four quarters for an average positive surprise of 27.1%.
Applied Industrial Technologies managed to beat estimates thrice over the trailing four quarters and has a positive earnings surprise of 6.2%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>