Tetra Tech, Inc. (TTEK Quick QuoteTTEK - Free Report) reported fourth-quarter fiscal 2023 (ended Oct 1, 2023) adjusted earnings of $1.78 per share, which surpassed the Zacks Consensus Estimate of earnings of $1.45 per share. The bottom line surged 41.3% year over year driven by strong momentum in all segments.

The bottom line also surpassed management’s projection of earnings of $1.43-$1.48 per share.

Revenue & Segmental Performance

In the fiscal fourth quarter, Tetra Tech generated adjusted revenues of $1,260.6 million, reflecting a year-over-year increase of 39.7%. Adjusted net revenues (adjusted revenues minus subcontractor costs) were $1,057.4 million, up 43.6% year over year. The quarterly top line came above management’s guidance of $965-$1,015 million.

Tetra Tech’s revenues exceeded the Zacks Consensus Estimate of $981 million.

The backlog at the end of the fiscal quarter was $4,790.4 million, up 28% year over year.

Revenues from U.S. Federal customers (accounting for 29% of the quarter’s revenues) were up 46% year over year, supported by federal IT growth. U.S. Commercial sales (19% of the quarter’s revenues) increased 13% year over year on higher clean Energy and Environmental services sales.

U.S. State and Local sales (12% of the quarter’s revenues) increased 15%, due to strength in digital water and resilience planning. International sales (40% of the quarter’s revenues) increased 78% year over year, backed by higher infrastructure sales.

Tetra Tech reports revenues under the segments discussed below:

Net sales of the Government Services Group segment were $457 million, up 36% year over year. Revenues from the Commercial/International Services Group segment totaled $601 million, representing a year-over-year increase of 50%.

Margin Profile

In the fiscal fourth quarter, Tetra Tech’s subcontractor costs totaled $203.2 million, reflecting an increase of 22.1% from the year-ago quarter. Other costs of revenues (adjusted) were $845.3 million, up 45.7% from the fiscal fourth quarter of 2022. Selling, general and administrative expenses were $77.2 million, up 26.9% from the year-ago fiscal quarter.

Operating income (adjusted) in the reported fiscal quarter increased 43.8% year over year to $134.9 million, while the adjusted margin increased 10 basis points to 12.8%.

Balance Sheet and Cash Flow

While exiting fourth-quarter fiscal 2023, Tetra Tech had cash and cash equivalents of $168.8 million compared with $185.1 million recorded at the end of the fourth quarter of fiscal 2022. Long-term debt was $879.5 million compared with $246.3 million recorded at the end of fourth-quarter fiscal 2022.

In fiscal 2023, Tetra Tech generated net cash of $368.5 million from operating activities compared with $336.2 million in the prior fiscal year’s comparable period. Capital expenditure was $26.9 million, up 154.2% year over year. In the said fiscal period, TTEK’s proceeds from borrowings amounted to $994.9 million, while repayments on long-term debt totaled $161.5 million.

Shareholder-Friendly Policies

Tetra Tech distributed dividends totaling $52.1 million in fiscal 2023. This compares favorably with the dividends of $46.1 million distributed in the year-ago fiscal period.

Fiscal 2024 Outlook

For fiscal 2024 (ending September 2024), Tetra Tech anticipates net revenues to be $4.05-$4.25 billion. The midpoint of the guided range — $4.15 billion — lies above the Zacks Consensus Estimate of $4.05 billion. Adjusted earnings are predicted to be $5.70-$6.00 per share. The midpoint of the guided range — $5.84 — lies below the Zacks Consensus Estimate of earnings of $5.94 per share.

For the first quarter of fiscal 2024 (ending December 2024), management estimates net revenues to be $950-$1000 million. The midpoint of the guided range — $975 million — lies above the Zacks Consensus Estimate of $969 million. Adjusted earnings are projected to be $1.30-$1.38 per share for the fiscal quarter. The midpoint of the guided range — $1.34 — lies below the consensus estimate of earnings of $1.38 per share.

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:

Graco Inc. (GGG Quick QuoteGGG - Free Report) presently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GGG’s earnings surprise in the last four quarters was 7.2%, on average. In the past 60 days, estimates for Graco’s 2023 earnings have increased 1.7%. The stock has gained 13.9% in the past year.

Applied Industrial Technologies, Inc. (AIT Quick QuoteAIT - Free Report) presently carries a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 13.9%, on average.

AIT’s earnings estimates have increased 3.7% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 26.5% in the past year.

A. O. Smith Corporation (AOS Quick QuoteAOS - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 14%, on average.

In the past 60 days, estimates for A. O. Smith’s earnings have increased 5% for 2023. The stock has soared 25.4% in the past year.