Back to top

Image: Bigstock

Tetra Tech (TTEK) Q2 Earnings Top Estimates, Revenues Up

Read MoreHide Full Article

Tetra Tech, Inc. (TTEK - Free Report) reported solid results for the second quarter of fiscal 2021 (ended Mar 28, 2021), with earnings surpassing estimates by 10.7%. This was the 15th consecutive quarter of better-than-anticipated results.

The company’s adjusted earnings per share in the reported quarter came in at 83 cents, handily outpacing the Zacks Consensus Estimate of 75 cents. Also, earnings increased 13.7% from the year-ago quarter’s 73 cents.

The bottom line also topped management’s projection of 73-78 cents per share.

Despite such impressive performance, the Pasadena, CA-based company failed to boost investor sentiments as its shares fell 5.4% on Apr 29, to close the trading session at $127.04.

Revenues & Segmental Performance

In the fiscal second quarter, Tetra Tech generated adjusted revenues of $754.3 million, reflecting a year-over-year increase of 2.7%. Adjusted net revenues (adjusted revenues minus subcontractor costs) came in at $599.3 million, up 2.5%. The figure surpassed the company’s guidance of $565-$595 million.

Further, Tetra Tech’s revenues exceeded the Zacks Consensus Estimate of $583 million.

Backlog at the end of the quarter was $3,150.2 million, down 1.2% from the previous quarter.

Revenues from the U.S. Federal customers (accounting for 31% of the quarter’s revenues) were up 6% year over year. Growth in advanced analytics was negated by a delay in international development projects.

The U.S. Commercial sales (21% of the quarter’s revenues) declined 7% year over year on lower discretionary industrial programs. Stability was witnessed in regulatory-driven programs.

The U.S. State and Local sales (17% of the quarter’s revenues) increased 32% on strength across municipal infrastructure backed by effective disaster response. International sales (31% of the quarter’s revenues) decreased 5% year over year.

The company reports revenues under the segments discussed below:

Net sales of Government Services Group came in at $347.1 million, up 8.1% year over year.

Revenues from Commercial / International Services Group totaled $252.2 million, underlining a year-over-year decline of 4.3%.

Tetra Tech, Inc. Price, Consensus and EPS Surprise

Tetra Tech, Inc. Price, Consensus and EPS Surprise

Margin Profile

In the fiscal second quarter, Tetra Tech’s subcontractor costs totaled $154.9 million, reflecting a rise of 3.5% from the year-ago quarter. Other costs of revenues (adjusted) were $486.8 million, up 1.1%. Selling, general and administrative expenses (adjusted) were $51.7 million, up 2.4%.

Net income in the reported quarter increased 25.1% year over year to $45.5 million, while adjusted margin expanded 110 basis points to 10.1%.

Balance Sheet and Cash Flow

Exiting the fiscal second quarter, Tetra Tech had cash and cash equivalents of $225.3 million, up 37.9% from $163.4 million recorded at the end of the prior quarter. Long-term debt was down 13.7% sequentially to $238.3 million from $276 million.

In the first six months of fiscal 2021, it generated net cash of $157.4 million from operating activities compared with $83.2 million in the year-ago period. Capital expenditure was $4.3 million, down 26.9%. In the same time frame, the company’s proceeds from borrowings amounted to $141.6 million, while repayments totaled $146.3 million.

Shareholder-Friendly Policy

In the first six months of fiscal 2021, the company bought back shares worth $30 million and distributed dividends totaling $18.4 million.

Exiting the fiscal second quarter, the company had $178 million worth authorization left under its approved buyback programs.

Outlook

For fiscal 2021 (ending September 2021), Tetra Tech anticipates net revenues of $2.45-$2.55 billion compared with $2.40-$2.55 billion guided earlier, while adjusted earnings are predicted to be $3.60-$3.70 compared with $3.45-$3.60 predicted earlier. The bottom-line projection is higher than the $3.26 recorded in fiscal 2020.

For the fiscal third quarter (ending Jun 2021), the company estimates net revenues of $600-$650 million and adjusted earnings per share of 85-90 cents.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader industry are Energy Recovery, Inc. (ERII - Free Report) , Sharps Compliance Corp. (SMED - Free Report) and Titan International, Inc. (TWI - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Energy Recovery delivered an earnings surprise of 232.1%, on average, in the trailing four quarters.

Sharps Compliance delivered an earnings surprise of 306.7%, on average, in the trailing four quarters.

Titan International delivered an earnings surprise of 32.3%, on average, in the trailing four quarters.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>