Tetra Tech, Inc. (TTEK Quick QuoteTTEK - Free Report) reported first-quarter fiscal 2024 (ended Dec 31, 2023) adjusted earnings of $1.40 per share, which surpassed the Zacks Consensus Estimate of $1.35. The bottom line surged 4.5% year over year driven by strong momentum in each of its segments.

The bottom line also surpassed management’s projection of earnings of $1.30-$1.38 per share.

Revenue & Segmental Performance

In the fiscal first quarter, Tetra Tech generated adjusted revenues of $1.2 billion, reflecting a year-over-year increase of 37.3%. Adjusted net revenues (adjusted revenues minus subcontractor costs) were $1.0 billion, up 37.8% year over year. The quarterly top line was in line with the high range of management’s guidance of $950 million -$1.0 billion.

Tetra Tech’s revenues exceeded the Zacks Consensus Estimate of $974 million.

The backlog at the end of the fiscal quarter was $4.7 billion, up 24.2% year over year.

Revenues from U.S. Federal customers (accounting for 30% of the quarter’s revenues) were up 49% year over year, supported by higher demand from the Department of Defense and USAID / Ukraine. U.S. Commercial sales (19% of the quarter’s revenues) increased 10% year over year on higher clean energy permitting and environmental services sales.

U.S. State and Local sales (11% of the quarter’s revenues) increased 16%, due to strength in digital water. International sales (40% of the quarter’s revenues) increased 74% year over year, backed by higher clean energy sales and the RPS acquisition.

Tetra Tech reports revenues under the segments discussed below:

Net sales of the Government Services Group segment were $443 million, up 25% year over year. The Zacks Consensus Estimate for the segment’s revenues was $368 million. Revenues from the Commercial/International Services Group segment totaled $572 million, representing a year-over-year increase of 49%. The consensus estimate for the segment’s revenues was $606 million.

Margin Profile

In the fiscal first quarter, Tetra Tech’s subcontractor costs totaled $213.1 million, reflecting an increase of 34.7% from the year-ago quarter. Other costs of revenues (adjusted) were $824.7 million, up 41.4% from the fiscal first quarter of 2023. Selling, general and administrative expenses were $79.4 million, up 40.6% from the year-ago fiscal quarter.

Operating income (adjusted) in the reported fiscal quarter increased 20.7% year over year to $111.1 million while the adjusted margin decreased 220 basis points to 10.9%.

Balance Sheet and Cash Flow

While exiting first-quarter fiscal 2024, Tetra Tech had cash and cash equivalents of $198.7 million compared with $168.8 million recorded at the end of the fourth quarter of fiscal 2023. Long-term debt was $945.3 million compared with $879.5 million recorded at the end of fourth-quarter fiscal 2023.

In the first three months of fiscal 2024, Tetra Tech generated net cash of $9.2 million from operating activities compared with $25.2 million in the prior fiscal year’s comparable period. Capital expenditure was $3.5 million, down 30.8% year over year. In the said fiscal period, TTEK’s proceeds from borrowings amounted to $125 million while repayments on long-term debt totaled $60 million.

Shareholder-Friendly Policies

Tetra Tech distributed dividends totaling $13.9 million in the first three months of fiscal 2024. This compares favorably with the dividends of $12.2 million distributed in the year-ago fiscal period.

Fiscal 2024 Outlook Raised

For fiscal 2024 (ending September 2024), Tetra Tech anticipates net revenues to be $4.15-$4.30 billion compared with $4.05-$4.25 billion expected earlier. The midpoint of the guided range — $4.22 billion — lies above the Zacks Consensus Estimate of $4.20 billion. Adjusted earnings are predicted to be $5.90-$6.20 per share compared with $5.70-$6.00 per share predicted earlier. The midpoint of the guided range — $6.05— lies above the consensus estimate of earnings of $5.90 per share.

For the second quarter of fiscal 2024 (ending March 2024), management estimates net revenues to be $990 million-$1.04 billion. The midpoint of the guided range — $1.02 billion — is in line with the Zacks Consensus Estimate. Adjusted earnings are projected to be $1.25-$1.35 per share for the fiscal quarter. The midpoint of the guided range — $1.30 — lies below the consensus estimate of earnings of $1.31 per share.

Zacks Rank & Stocks to Consider

Tetra Tech currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:

Flowserve Corporation (FLS Quick QuoteFLS - Free Report) presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has remained steady. The stock has risen 15.1% in the past year.

A. O. Smith Corporation (AOS Quick QuoteAOS - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 12%.

The Zacks Consensus Estimate for AOS’ 2024 earnings increased 1.5% in the past 60 days. Shares of A. O. Smith have jumped 12.8% in the past year.

Parker-Hannifin Corporation (PH Quick QuotePH - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 11.8%.

In the past 60 days, the Zacks Consensus Estimate for Parker-Hannifin’s fiscal 2024 (ending June 2024) earnings has increased 0.3%. The stock has risen 57.8% in the past year.