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Tetra Tech (TTEK) Q2 Earnings and Revenues Surpass Estimates

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Tetra Tech, Inc. (TTEK - Free Report) reported better-than-expected results for second-quarter fiscal 2022 (ended March 2022). Earnings beat the Zacks Consensus Estimate by 8.9%, marking the 19th consecutive quarter of delivering a surprise. Sales also surpassed estimates by 5.8%.

Tetra Tech’s adjusted earnings per share in the reported quarter were 98 cents, surpassing the Zacks Consensus Estimate of 90 cents. Quarterly earnings expanded 18% from the year-ago quarter’s reported figure of 83 cents.

The bottom line also surpassed management’s projection of 86-91 cents per share.

Revenue & Segmental Performance

In the fiscal second quarter, Tetra Tech generated adjusted revenues of $853 million, reflecting a year-over-year increase of 13%. Adjusted net revenues (adjusted revenues minus subcontractor costs) were $700 million, up 12.3% year over year. The quarterly top line came above management’s guidance of $620-$670 million.

Tetra Tech’s revenues exceeded the Zacks Consensus Estimate of $662 million.

Backlog at the end of the quarter was $3,610.2 million, up 15% year over year.

Revenues from the U.S. Federal customers (accounting for 27% of the quarter’s revenues) were up 2% year over year. The U.S. Commercial sales (21% of the quarter’s revenues) increased 14% year over year on higher environmental programs.

The U.S. State and Local sales (18% of the quarter’s revenues) increased 25% on strength across municipal infrastructure. International sales (34% of the quarter’s revenues) increased 29% year over year, backed by strength in Government and commercial segments.

Tetra Tech reports revenues under the segments discussed below:

Net sales of Government Services Group were $338 million, up 9% year over year. Revenues from Commercial/International Services Group totaled $362 million, underlining a year-over-year increase of 25%.

Tetra Tech, Inc. Price, Consensus and EPS Surprise Tetra Tech, Inc. Price, Consensus and EPS Surprise

Tetra Tech, Inc. price-consensus-eps-surprise-chart | Tetra Tech, Inc. Quote

Margin Profile

In the fiscal second quarter, Tetra Tech’s subcontractor costs totaled $153.1 million, reflecting a fall of 1.2% from the year-ago quarter’s level. Other costs of revenues were $564.5 million, up 15.8%. Selling, general and administrative expenses were $60.7 million, up 17.4% from the year-ago quarter’s figure.

Operating income (adjusted) in the reported quarter increased 22.9% year over year to $74.5 million, while the adjusted margin expanded 60 basis points to 10.7%.

Balance Sheet and Cash Flow

Exiting the fiscal second quarter, Tetra Tech had cash and cash equivalents of $194.3 million, down 5.5% from $205.5 million recorded at the end of the prior quarter. Long-term debt decreased 3.8% sequentially to $237.5 million.

In the quarter, Tetra Tech generated net cash of $177.5 million from operating activities compared with $157.4 million in the year-ago quarter. Capital expenditure was $5.6 million, up 30.2% year over year. In the said period, TTEK’s proceeds from borrowings amounted to $141.5 million, while repayments totaled $105.8 million.

Shareholder-Friendly Policies

Tetra Tech bought back shares worth $100 million and distributed dividends totaling $21.6 million in the second quarter of fiscal 2022. These compare favorably with the share buybacks of $50 million and dividends of $10.8 million distributed in first-quarter fiscal 2021.

Exiting the fiscal second quarter, TTEK had $448 million worth of authorization left under its approved buyback programs.

On May 2, 2022, Tetra Tech’s board of directors approved a quarterly cash dividend of 23 cents per share, up 15% from the previous year’s payout. TTEK will pay out the dividend on May 27 to its shareholders of record as of May 13, 2022.

Outlook

For fiscal 2022 (ending September 2022), Tetra Tech anticipates net revenues of $2.72-$2.82, higher than $2.65-$2.80 billion expected previously. Adjusted earnings are predicted to be $4.30-$4.40, up from the previously guided range of $4.15-$4.30.

For the third quarter of fiscal 2022 (ending June 2022), management estimates net revenues of $665-$715 million and adjusted earnings per share of $1.00-$1.05.

Zacks Rank & Stocks to Consider

With a market capitalization of $7.8 billion, TTEK currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies from the industrial products sector are discussed below.

Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1. AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AIT’s earnings estimates have increased 5.4% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have rallied 17.2% in the past three months.

Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.

In the past 60 days, ROP’s earnings estimates have increased 1.1% for 2022. The stock has inched up 4.8% in the past three months.

Ferguson plc (FERG - Free Report) is presently Zacks #2 Ranked. FERG’s earnings surprise in the last four quarters was 14.2%, on average.

In the past 60 days, the stock’s earnings estimates have increased 6.5% for fiscal 2022 (ending July 2022). The same has declined 16.3% in the past three months.