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Tetra Tech (TTEK) Gains 20.1% in a Year: Will the Upside Last?

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Tetra Tech, Inc. (TTEK - Free Report) appears in good shape, with its shares rallying more than 20% in a year, outperforming the industry’s 1.4% increase.

What’s Aiding TTEK?

Increased environmental services and digital water programs for both the state and local and federal clients within the Government Services Group (GSG) segment are aiding TTEK. Increased revenues from the legacy business and programs for renewable energy, high-performance building activities and Brazilian infrastructure are supporting the Commercial/International Services Group segment.

TTEK’s measures to expand its operations through asset additions support its top-line growth. The acquisition of RPS Group plc, in January 2023, enhanced Tetra Tech’s consultancy in water, environment and sustainable infrastructure, expanding its water practice in the United Kingdom and strengthening its foothold in renewable energy and environmental management.

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The company also acquired Reston, VA-based firm Amyx, Inc. in the same month. As part of the Federal Information Technology division, the Amyx acquisition expands its use of advanced data analytics, cybersecurity, digital transformation and agile software development solutions for its government and commercial customers. Amyx is integrated into TTEK’s GSG segment. The company spent $854.3 million on acquisitions in the first nine months of fiscal 2023 (ended Jul 2, 2023).

Tetra Tech’s focus on providing high-end consulting, design and engineering services is constantly enhancing its competitive edge. Increased activity in the U.S. Federal, U.S. Commercial and International client sectors, and the RPS acquisition are supporting the company’s top line. TTEK is also gaining from a robust backlog level. Tetra Tech’s backlog at the end of third-quarter fiscal 2023 was $4,386.3 billion, reflecting an increase of 25% year over year. Given the company’s strong performance and solid backlog, Tetra Tech has increased its earnings per share guidance for fiscal 2023 (ending September 2023). The company now anticipates adjusted earnings to be $5.22-$5.27 per share compared with adjusted earnings of $5.07-$5.17 per share predicted earlier.

The company’s commitment to rewarding its shareholders through dividends holds promise. In the first nine months of fiscal 2023, Tetra Tech paid out dividends of $46.1 million. The quarterly dividend rate was hiked 13% in May 2023.

Will the Uptrend in Shares Last?

Though the company is facing challenges due to increasing costs of sales and forex woes, improving supply-chain conditions are expected to aid Tetra Tech in the quarters ahead. Also, key factors, including U.S. administration priorities, U.S. infrastructure stimulus and TTEK’s focus on climate change on a global basis, are expected to drive the company’s performance in the near term.

Zacks Rank & Other Stocks to Consider

Tetra Tech currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:

Caterpillar Inc. (CAT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CAT’s earnings surprise in the last four quarters was 18.5%, on average. In the past 60 days, estimates for Caterpillar’s earnings have increased 10.5% for 2023. The stock has gained 67.9% in the past year.

Ingersoll Rand Inc. (IR - Free Report) presently sports a Zacks Rank of 1. IR’s earnings surprise in the last four quarters was 14.9%, on average.

In the past 60 days, estimates for Ingersoll Rand’s earnings have increased 3% for 2023. The stock has gained 48.9% in the past year.

Eaton Corporation plc (ETN - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 3%, on average.

In the past 60 days, estimates for Eaton’s earnings have increased 3.9% for 2023. The stock has soared 59.2% in the past year.

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