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Tetra Tech (TTEK) Displays Solid Prospects: Time to Buy?
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Leading global consulting and engineering services firm, Tetra Tech, Inc. (TTEK - Free Report) has been in focus ever since the U.S. elections, which saw Donald Trump emerge as the victor. There are ample reasons to believe the stock is expected to gain substantially from Trump’s pro-infrastructure policies.
In a bid to maximize growth prospects, Tetra Tech is currently focusing on high-end consulting and engineering services. This, in turn, would promote its high-value and high-margin business. The company remains confident that such actions will differentiate it from peers. Here’s discussing a few factors which makes us believe that the stock has much upside left:
The Infrastructure Investment Drive
The broad-based bipartisan support for infrastructure investment in the U.S., which can range from $500 billion up to $1 trillion, is anticipated to open a floodgate of opportunities for Tetra Tech. Steady growth in local budgets and capital spending has been supplementing the company’s strength. With $200 billion in programs passed, since the Nov 2016 election, the company’s future looks promising. Trump’s administration has already begun to identify potential priority projects across quite a broad range of infrastructure services, including water infrastructure.
Tetra Tech remains optimistic about the positive industry trends and expects to roll out the next-generation aviation technology that it has been working on for many years. In addition, the company has a long history of providing services to the U.S. Department of Defense. Presently, it holds over $5 billion in contract capacity across the Department of Defense and 40 different indefinite delivery, indefinite quantity contracts with the Army.
At present, there are talks of an impending hike of the 27th budget for the Department of Defense. If the hike is authorized, the company might win a string of task orders for upgrades, design projects and accelerated cleanups. Additionally, talks of associated military expansion and facility restructuring, expected under the Trump administration, are likely to accelerate the company’s growth. Robust pipeline with major government organizations like the U.S. Department of State, U.S. Army Corp. of Engineers and U.S. Air Force is estimated to generate billion-dollar deals.
We believe the company’s solid backlog levels provide excellent visibility into fiscal 2017 and signal brighter days ahead. During first-quarter fiscal 2017, total backlog from ongoing operations reached a record high of $2.5 billion, a remarkable jump of 37% year over year, driven by strong orders in the federal, and state and local markets.
Solid Financials
Tetra Tech has not missed earnings estimates in the trailing ten quarters, which is an impressive feat. The company started the year on a high note, with impressive top- and bottom-line performance, and sturdy year-over-year growth. During the fiscal first quarter, adjusted earnings of 49 cents topped the Zacks Consensus Estimate by 4.3% and net revenue of $490 million beat the consensus mark of $476 million. The figures also fared better on a year-over-year basis.
Tetra Tech’s shares have had a solid run in recent times, on the back of its remarkable top-line growth, restructuring efforts and accretive acquisitions. Over the past six months, the company’s shares returned 18.8%, more than double than that of the Zacks classified Pollution Control Equipment and Services industry average of 9.4%.
Tetra Tech has also been witnessing robust activity on the earnings estimate revision front. Analysts have become increasingly bullish on the stock over the past two months, as the Zacks Consensus Estimate for fiscal 2017 earnings trended up over the same time frame, moving from $2.15 to $2.18.
We also believe that the company is undervalued relative to the industry as suggested by its Price to Earnings Ratio (“P/E”) metric. P/E is a key metric that shows how much investors are willing to pay for each dollar of earnings in a given stock. More importantly, this metric helps us understand how a particular stock’s valuation compares to its peers. For Tetra Tech, the trailing six-month PE ratio is 20.66, lower than the Pollution Control Equipment and Services’ PE of 29.89.
Zacks Rank & Stocks to Consider
Tetra Tech currently carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the broader sector include II-VI Inc. , EnerSys (ENS - Free Report) and Applied Industrial Technologies Inc. (AIT - Free Report) . While II-VI boasts a Zacks Rank #1 (Strong Buy), EnerSys and Applied Industrial Technologies carry a Zacks Rank #2. 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.
Applied Industrial Technologies managed to beat estimates thrice over the last four quarters and has a positive earnings surprise of 6.2%.
EnerSys has surpassed earnings estimates each time in the past four quarters, with an average positive beat of 4.4%.
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Tetra Tech (TTEK) Displays Solid Prospects: Time to Buy?
Leading global consulting and engineering services firm, Tetra Tech, Inc. (TTEK - Free Report) has been in focus ever since the U.S. elections, which saw Donald Trump emerge as the victor. There are ample reasons to believe the stock is expected to gain substantially from Trump’s pro-infrastructure policies.
In a bid to maximize growth prospects, Tetra Tech is currently focusing on high-end consulting and engineering services. This, in turn, would promote its high-value and high-margin business. The company remains confident that such actions will differentiate it from peers. Here’s discussing a few factors which makes us believe that the stock has much upside left:
The Infrastructure Investment Drive
The broad-based bipartisan support for infrastructure investment in the U.S., which can range from $500 billion up to $1 trillion, is anticipated to open a floodgate of opportunities for Tetra Tech. Steady growth in local budgets and capital spending has been supplementing the company’s strength. With $200 billion in programs passed, since the Nov 2016 election, the company’s future looks promising. Trump’s administration has already begun to identify potential priority projects across quite a broad range of infrastructure services, including water infrastructure.
Tetra Tech remains optimistic about the positive industry trends and expects to roll out the next-generation aviation technology that it has been working on for many years. In addition, the company has a long history of providing services to the U.S. Department of Defense. Presently, it holds over $5 billion in contract capacity across the Department of Defense and 40 different indefinite delivery, indefinite quantity contracts with the Army.
At present, there are talks of an impending hike of the 27th budget for the Department of Defense. If the hike is authorized, the company might win a string of task orders for upgrades, design projects and accelerated cleanups. Additionally, talks of associated military expansion and facility restructuring, expected under the Trump administration, are likely to accelerate the company’s growth. Robust pipeline with major government organizations like the U.S. Department of State, U.S. Army Corp. of Engineers and U.S. Air Force is estimated to generate billion-dollar deals.
We believe the company’s solid backlog levels provide excellent visibility into fiscal 2017 and signal brighter days ahead. During first-quarter fiscal 2017, total backlog from ongoing operations reached a record high of $2.5 billion, a remarkable jump of 37% year over year, driven by strong orders in the federal, and state and local markets.
Solid Financials
Tetra Tech has not missed earnings estimates in the trailing ten quarters, which is an impressive feat. The company started the year on a high note, with impressive top- and bottom-line performance, and sturdy year-over-year growth. During the fiscal first quarter, adjusted earnings of 49 cents topped the Zacks Consensus Estimate by 4.3% and net revenue of $490 million beat the consensus mark of $476 million. The figures also fared better on a year-over-year basis.
Tetra Tech’s shares have had a solid run in recent times, on the back of its remarkable top-line growth, restructuring efforts and accretive acquisitions. Over the past six months, the company’s shares returned 18.8%, more than double than that of the Zacks classified Pollution Control Equipment and Services industry average of 9.4%.
Tetra Tech has also been witnessing robust activity on the earnings estimate revision front. Analysts have become increasingly bullish on the stock over the past two months, as the Zacks Consensus Estimate for fiscal 2017 earnings trended up over the same time frame, moving from $2.15 to $2.18.
We also believe that the company is undervalued relative to the industry as suggested by its Price to Earnings Ratio (“P/E”) metric. P/E is a key metric that shows how much investors are willing to pay for each dollar of earnings in a given stock. More importantly, this metric helps us understand how a particular stock’s valuation compares to its peers. For Tetra Tech, the trailing six-month PE ratio is 20.66, lower than the Pollution Control Equipment and Services’ PE of 29.89.
Zacks Rank & Stocks to Consider
Tetra Tech currently carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the broader sector include II-VI Inc. , EnerSys (ENS - Free Report) and Applied Industrial Technologies Inc. (AIT - Free Report) . While II-VI boasts a Zacks Rank #1 (Strong Buy), EnerSys and Applied Industrial Technologies carry a Zacks Rank #2. 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.
Applied Industrial Technologies managed to beat estimates thrice over the last four quarters and has a positive earnings surprise of 6.2%.
EnerSys has surpassed earnings estimates each time in the past four quarters, with an average positive beat of 4.4%.
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Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>