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Tetra Tech (TTEK) Beats on Q2 Earnings, Raises EPS View
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In the recently reported second-quarter fiscal 2017 results, Tetra Tech Inc. (TTEK - Free Report) posted its second consecutive earnings beat. The company’s earnings from ongoing operations of 48 cents beat the Zacks Consensus Estimate of 46 cents by 4.3%. Earnings exceeded the company’s guided range of 42–47 cents.
Tetra Tech fared even better year over year, with adjusted earnings up 30% from the prior-year quarter’s figure of 37 cents. Decent top-line growth and greater operating efficiency resulting from cost-management initiatives, fueled bottom-line growth.
Inside the Headlines
Net revenues were up 6.9% year over year to $511.9 million, comfortably beating the Zacks Consensus Estimate of $491 million. Revenues surpassed the upper end of the company’s estimated range of $450–$475 million. Moreover, Tetra Tech’s ongoing revenues grew 8% to $515.6 million on a year-over-year basis.
The top line was supported by the expansion of the U.S. Federal, State and Local, and Commercial development projects. Primarily, strong performance of the Water, Environment and Infrastructure segment supplemented the quarterly sales performance.
Water, Environment and Infrastructure revenues continued their solid growth trajectory, rising 21.0% year over year to $201 million. This segment primarily benefited from robust performance of the North American infrastructure and environmental business lines.
Also, net revenues from Resource Management and Energy rose 2.0% year over year to $315 million. While the U.S. development projects drove the sales performance, sluggish oil and gas markets restricted top-line growth.
In the quarter under review, total backlog from ongoing operations reached $2.5 billion, marking an impressive jump of 18% year over year, driven by strong orders in the federal and state, and local markets. Some of the notable contracts clinched by the company during the quarter include the $240 million U.S. Navy Remediation contract, the $57 million USAID Pakistan Energy contract and the $25 million USAID Mozambique Monitoring & Evaluation contract.
Additionally, ongoing operating income was up 27% year over year to $44 million.
Tetra Tech, Inc. Price, Consensus and EPS Surprise
At the end of the quarter, Tetra Tech’s cash and cash equivalents were $171.3 million, up from $127 million at the end of first-quarter fiscal 2017. At the end of the fiscal second quarter, the company’s long-term debt was $326.9 million, down from $372.7 million as of Jan 1, 2017.
For the quarter, the company’s cash generated in operations came in at $50.3 million, significantly up from the year-ago figure of $30.2 million.
Share Repurchase
Tetra Tech is highly committed toward rewarding its shareholders through dividends and share buyback programs. On May 1, 2017, the company declared raising its quarterly dividend by 11% to 10 cents per share payable on Jun 2, 2017 to stockholders of record as of May 18.
Currently, Tetra Tech has $180 million remaining under the previously approved $200 million share repurchase program. The company expects to spend $100 million in share repurchases for fiscal 2017, of which, $20 million was spent in the first six months.
Outlook
Concurrent with the quarterly earnings release, Tetra Tech provided revenue and earnings guidance for both the upcoming quarter and fiscal 2017. The company expects third-quarter fiscal 2017 earnings per share to be in the range of 50–55 cents. Net revenue for the fiscal third quarter is projected to be within $510–$540 million.
Encouragingly, the company raised its Earnings Per Share (“EPS”) guidance for fiscal 2017. It now projects EPS in the range of $2.10–$2.25 compared with the earlier guided range of $2.00–$2.20. Also, based on the current market scenario, Tetra Tech tweaked its revenue guidance and expects it to be within $2.05–$2.10 billion, instead of the earlier guided range of $2.0–$2.10 billion.
Our Take
Tetra Tech has not missed earnings estimates in the trailing eleven quarters, which is an impressive feat. In a bid to maximize growth prospects, the company is currently focusing on high-end consulting and engineering services that is helping it promote its high value and high margin business, thus differentiating it from peers in the marketplace. For fiscal 2017, Tetra Tech remains bullish about its growth across all four client sectors, namely, the U.S. federal, the U.S. state and local, the U.S. commercial work and international.
The company’s U.S. state and local clients – in both the municipal water and smart water services domains – are expected to be its strongest growth drivers for the upcoming quarters. The broad-based bipartisan support for infrastructure investment in the U.S., which can range from $500 billion to $1 trillion, can prove to be extremely beneficial for the company. Steady growth in local budgets and local capital spending has been adding to this Zacks Rank #3 (Hold) company’s strength.
Applied Industrial Technologies has managed to beat estimates thrice in the trailing four quarters for a positive earnings surprise of 9.8%.
With three beats over the trailing four quarters, Donaldson has a positive average earnings surprise of 5.9%.
Middleby Corporation beat earnings in each of the trailing four quarters, resulting in an average surprise of 14.1%.
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Image: Bigstock
Tetra Tech (TTEK) Beats on Q2 Earnings, Raises EPS View
In the recently reported second-quarter fiscal 2017 results, Tetra Tech Inc. (TTEK - Free Report) posted its second consecutive earnings beat. The company’s earnings from ongoing operations of 48 cents beat the Zacks Consensus Estimate of 46 cents by 4.3%. Earnings exceeded the company’s guided range of 42–47 cents.
Tetra Tech fared even better year over year, with adjusted earnings up 30% from the prior-year quarter’s figure of 37 cents. Decent top-line growth and greater operating efficiency resulting from cost-management initiatives, fueled bottom-line growth.
Inside the Headlines
Net revenues were up 6.9% year over year to $511.9 million, comfortably beating the Zacks Consensus Estimate of $491 million. Revenues surpassed the upper end of the company’s estimated range of $450–$475 million. Moreover, Tetra Tech’s ongoing revenues grew 8% to $515.6 million on a year-over-year basis.
The top line was supported by the expansion of the U.S. Federal, State and Local, and Commercial development projects. Primarily, strong performance of the Water, Environment and Infrastructure segment supplemented the quarterly sales performance.
Water, Environment and Infrastructure revenues continued their solid growth trajectory, rising 21.0% year over year to $201 million. This segment primarily benefited from robust performance of the North American infrastructure and environmental business lines.
Also, net revenues from Resource Management and Energy rose 2.0% year over year to $315 million. While the U.S. development projects drove the sales performance, sluggish oil and gas markets restricted top-line growth.
In the quarter under review, total backlog from ongoing operations reached $2.5 billion, marking an impressive jump of 18% year over year, driven by strong orders in the federal and state, and local markets. Some of the notable contracts clinched by the company during the quarter include the $240 million U.S. Navy Remediation contract, the $57 million USAID Pakistan Energy contract and the $25 million USAID Mozambique Monitoring & Evaluation contract.
Additionally, ongoing operating income was up 27% year over year to $44 million.
Tetra Tech, Inc. Price, Consensus and EPS Surprise
Tetra Tech, Inc. Price, Consensus and EPS Surprise | Tetra Tech, Inc. Quote
Liquidity & Cash Flow
At the end of the quarter, Tetra Tech’s cash and cash equivalents were $171.3 million, up from $127 million at the end of first-quarter fiscal 2017. At the end of the fiscal second quarter, the company’s long-term debt was $326.9 million, down from $372.7 million as of Jan 1, 2017.
For the quarter, the company’s cash generated in operations came in at $50.3 million, significantly up from the year-ago figure of $30.2 million.
Share Repurchase
Tetra Tech is highly committed toward rewarding its shareholders through dividends and share buyback programs. On May 1, 2017, the company declared raising its quarterly dividend by 11% to 10 cents per share payable on Jun 2, 2017 to stockholders of record as of May 18.
Currently, Tetra Tech has $180 million remaining under the previously approved $200 million share repurchase program. The company expects to spend $100 million in share repurchases for fiscal 2017, of which, $20 million was spent in the first six months.
Outlook
Concurrent with the quarterly earnings release, Tetra Tech provided revenue and earnings guidance for both the upcoming quarter and fiscal 2017. The company expects third-quarter fiscal 2017 earnings per share to be in the range of 50–55 cents. Net revenue for the fiscal third quarter is projected to be within $510–$540 million.
Encouragingly, the company raised its Earnings Per Share (“EPS”) guidance for fiscal 2017. It now projects EPS in the range of $2.10–$2.25 compared with the earlier guided range of $2.00–$2.20. Also, based on the current market scenario, Tetra Tech tweaked its revenue guidance and expects it to be within $2.05–$2.10 billion, instead of the earlier guided range of $2.0–$2.10 billion.
Our Take
Tetra Tech has not missed earnings estimates in the trailing eleven quarters, which is an impressive feat. In a bid to maximize growth prospects, the company is currently focusing on high-end consulting and engineering services that is helping it promote its high value and high margin business, thus differentiating it from peers in the marketplace. For fiscal 2017, Tetra Tech remains bullish about its growth across all four client sectors, namely, the U.S. federal, the U.S. state and local, the U.S. commercial work and international.
The company’s U.S. state and local clients – in both the municipal water and smart water services domains – are expected to be its strongest growth drivers for the upcoming quarters. The broad-based bipartisan support for infrastructure investment in the U.S., which can range from $500 billion to $1 trillion, can prove to be extremely beneficial for the company. Steady growth in local budgets and local capital spending has been adding to this Zacks Rank #3 (Hold) company’s strength.
Stocks to Consider
Some better-ranked stocks in the broader sector include Applied Industrial Technologies Inc. (AIT - Free Report) , Donaldson Company, Inc. (DCI - Free Report) and The Middleby Corp. (MIDD - Free Report) . While Applied Industrial sports a Zacks Rank #1 (Strong Buy), Donaldson and Middleby carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies has managed to beat estimates thrice in the trailing four quarters for a positive earnings surprise of 9.8%.
With three beats over the trailing four quarters, Donaldson has a positive average earnings surprise of 5.9%.
Middleby Corporation beat earnings in each of the trailing four quarters, resulting in an average surprise of 14.1%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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