Tetra Tech, Inc. (TTEK Quick QuoteTTEK - Free Report) reported impressive first-quarter fiscal 2023 results. The company’s earnings beat the Zacks Consensus Estimate by 11.7%, marking the 22nd consecutive quarter of delivering a surprise. Sales also surpassed estimates by 2.2%.

Tetra Tech’s adjusted earnings per share in the reported quarter were $1.34, ahead of the Zacks Consensus Estimate of $1.20. Quarterly earnings expanded 12.6% from the year-ago reported figure of $1.19.

The bottom line also surpassed management’s projection of $1.15-$1.20 per share.

Revenue & Segmental Performance

In the fiscal first quarter, Tetra Tech generated adjusted revenues of $894.8 million, reflecting a year-over-year increase of 4.2%. Adjusted net revenues (adjusted revenues minus subcontractor costs) were $736.6 million, up 8.4% year over year. The quarterly top line came above management’s guidance of $675-$725 million.

Tetra Tech’s revenues exceeded the Zacks Consensus Estimate of $721 million.

The backlog at the end of the quarter was $3,814.3 million, up 11% year over year.

Revenues from U.S. Federal customers (accounting for 28% of the quarter’s revenues) were up 10% year over year. U.S. Commercial sales (24% of the quarter’s revenues) increased 22% year over year on higher renewable energy and environmental programs.

U.S. State and Local sales (17% of the quarter’s revenues) increased 10% due to strength in municipal infrastructure and digital water. International sales (31% of the quarter’s revenues) increased 13% year over year, backed by strength in sustainable infrastructure and high-performance building.

Tetra Tech reports revenues under the segments discussed below:

Net sales of Government Services Group were $471.1 million, up 3.3% year over year. Revenues from the Commercial/International Services Group totaled $439.6 million, representing a year-over-year increase of 5.6%.

Margin Profile

In the fiscal first quarter, Tetra Tech’s subcontractor costs totaled $158.2 million, reflecting a decrease of 11.7% from the year-ago quarter. Other costs of revenues were $583.3 million, up 8.1%. Selling, general and administrative expenses were $56.5 million, up 7.5% from the year-ago quarter.

Operating income (adjusted) in the reported quarter increased 17% year over year to $97 million, while the adjusted margin expanded 90 basis points to 13.1%.

Balance Sheet and Cash Flow

While exiting first-quarter fiscal 2023, Tetra Tech had cash and cash equivalents of $164.4 million, down 11.2% from $185.1 million recorded at the end of the fourth quarter of fiscal 2022. Long-term debt increased 5% from $234.1 million recorded at the end of fourth-quarter fiscal 2022 to $246.3 million.

In the first three months of fiscal 2023, Tetra Tech generated net cash of $25.2 million from operating activities compared with $82.4 million in the prior fiscal year’s comparable period. Capital expenditure was $5 million, up 233.3% year over year. In the said period, TTEK’s proceeds from borrowings amounted to $60.9 million, while repayments on long-term debt totaled $73.1 million.

Shareholder-Friendly Policies

Tetra Tech didn’t buy back shares in the fiscal first quarter. It bought back shares worth $50 million in the year-ago quarter. It distributed dividends totaling $12.2 million in the first quarter of fiscal 2023. This compares favorably with the dividends of $10.8 million distributed in the fiscal first quarter of 2022.

Outlook

For fiscal 2023 (ending September 2023), Tetra Tech anticipates net revenues of $3.00-$3.15 billion compared with $2.90-$3.10 billion anticipated earlier. Adjusted earnings are predicted to be $4.90-$5.05 compared with $4.70-$4.90 per share predicted earlier.

For the second quarter of fiscal 2023 (ending March 2023), management estimates net revenues of $ $685-$735 million and adjusted earnings of $1.03-$1.08 per share.

Zacks Rank & Stocks to Consider

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 Quick QuoteAIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy) and a trailing four-quarter earnings surprise of 20.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

AIT’s earnings estimates have increased 10.9% for fiscal 2023 (ending June 2023) in the past 60 days. Shares of Applied Industrial have risen 38.5% in the past six months.

Allegion plc (ALLE Quick QuoteALLE - Free Report) presently sports a Zacks Rank of 1. ALLE’s earnings surprise in the last four quarters was 8.8%, on average.

In the past 60 days, Allegion’s earnings estimates have remained steady for 2022. The stock has gained 19.5% in the past six months.

Valmont Industries, Inc. (VMI Quick QuoteVMI - Free Report) presently has a Zacks Rank #2 (Buy). VMI’s earnings surprise in the last four quarters was 12.5%, on average.

In the past 60 days, Valmont’s earnings estimates have increased by a penny. The stock has rallied 18.3% in the past six months.