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We recently maintained a Neutral recommendation on Tetra Tech Inc. (TTEK - Analyst Report).

Based in Pasadena, California, Tetra Tech Inc. is a leading provider of consulting, engineering, program management, construction and technical services focusing on resource management and infrastructure. It serves clients by providing cost-effective and innovative solutions to fundamental needs like water, environmental and alternative energy services.

It typically begins at the earliest stage of a project by applying science to problems while developing solutions tailored to clients' needs and resources. Its solutions may span the entire life cycle of the project and include applied science, research and technology, engineering, design, construction management, construction, operations and maintenance, and information technology.

On November 8, 2011, the company came out with its fourth-quarter 2011 earnings per share of $0.42, above the Zacks Consensus Estimate of $0.40 and the prior-year earnings of $0.35 per share.

For fiscal 2011, earnings per share were $1.43, above the Zacks Consensus Estimate of $1.41 cents and $1.21 in fiscal 2010. The company achieved record results this year, exceeding its 15% long-term growth goals for revenue and income. Tetra Tech benefited from contributions from recent acquisitions and strong demand for its water-related services provided to mining, energy and industrial clients.

Total revenue in the quarter was $675.7 million, an increase of 16.0% year over year. For fiscal 2011, total revenue in the quarter was $2,573.1 million, an increase of 19.3% year over year. Backlog at the end of the year was $1.95 billion, up 5.2% from $1.85 billion at the end of fiscal 2010.

Tetra Tech derived approximately 43.4% of total revenue in fiscal 2011 from the federal government and state and local government. The company’s revenue is generated from a diverse client base, Federal government, State and local government, Commercial and International. No single commercial client accounted for more than 10% of Tetra Tech’s revenue in fiscal 2011.

However, during fiscal 2011, Tetra Tech’s U.S. federal government business inched down 2.3%. Due to the U.S. federal budget uncertainties, the company continued to experience delays on new awards for certain large construction management projects in the U.S. and abroad.

For fiscal 2012, revenue, net of subcontractor cost, is expected to be in the range of $1.9 billion to $2.1 billion and diluted earnings per share are expected in the range of $1.50 to $1.63. The company’s results in the quarter exceeded its targeted long-term growth rate of 15% for revenue and income; the record level having been achieved. Better results are expected in fiscal 2012 asthe company benefits from growth in the international and commercial markets and stability in the government markets.

The company continuously evaluates the marketplace for strategic acquisition opportunities. In fiscal 2011, the company acquired BPR Inc., a Canadian scientific and engineering services firm. The acquisition enhances Tetra Tech’s geographic presence in eastern Canada, while facilitating it to provide clients with services throughout Canada.

BPR is now a part of Tetra Tech’s ECS segment. The company also acquired Proteus EPCM Engineers in Australia and Metalica Consultores, S.A. in Chile during fiscal 2011.

The company believes economic recovery in the United States will continue to be slow and steady after the severe economic weakness experienced during the global financial crisis. Markets outside the U.S. are expected to see a faster recovery.The major competitors of Tetra Tech are Arcadis NV (ARCAY.PK), Shaw Group Inc. and URS Corporation (URS - Analyst Report).

We expect the company to perform in line with the market and hence maintained a Neutral recommendation.

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