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Tetra Tech Inc. (TTEK - Analyst Report) reported its first-quarter 2012 earnings per share from continuing operations of 36 cents, in line with the Zacks Consensus Estimate and above prior-year earnings of 34 cents (excluding a prior-year tax benefit of approximately 2 cents). 

Total Revenue

Total revenue in the quarter was $682.6 million, an increase of 11.7% year over year. Revenue, net of subcontractor costs, was $492.1 million compared with $405.6 million in the prior-year quarter. Subcontractor cost in the quarter was $190.6 million compared with $205.5 million in the prior-year quarter.

Organic revenue of the company increased by 13%, primarily driven by international and U.S. commercial clients. International revenue increased by 41% while commercial net revenue increased by 25% year over year. Backlog was $1.9 billion at the end of the reported quarter, flat year over year.

Income

Operating income in the quarter amounted to $36.1 million compared with $34.1 million in the prior-year quarter.

Cash Flow

Tetra Tech generated cash flow from operations of $38.3 million compared with $8.9 million in the prior-year period.

Outlook

The company expects diluted earnings per share to be in the range of 32 cents to 34 cents in the second quarter of fiscal 2011. Revenue, net of subcontractor cost, is expected to be in the range of $430 million to $480 million in the quarter.

With rising demand in international and the US commercial markets and the US Government business gaining stability, the company raised it sfiscal 2012 earnings per share guidance to $1.54 to $1.64 from $1.50 to $1.63   For fiscal 2012, revenue, net of subcontractor cost, is expected to be in the range of $1.9 billion to $2.1 billion.

However, demand for state and local government services is cyclical and vulnerable to economic downturns; and if the economy weakens, its revenues, profits and financial condition may deteriorate. The company derives a majority of its revenue from government agencies, and any disruption in government funding or in its relationship with those agencies could adversely affect its business.

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 for water, environmental and alternative energy services. It typically begins at the earliest stage of a project by applying science to problems and 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. Major competitors of Tetra Tech are Arcadis NV, Shaw Group Inc. and URS Corporation (URS - Analyst Report).

We currently maintain our Neutral rating on Tetra Tech Inc. with a Zacks #4 Rank (short-term Sell recommendation) over the next one-to-three months.

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