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Tetra (TTEK) Down 23.1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Tetra Tech (TTEK - Free Report) . Shares have lost about 23.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Tetra due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Tetra Tech Q4 Earnings Top Estimates, Revenues Miss

Tetra Tech reported fourth-quarter fiscal 2018 adjusted earnings from ongoing operations of 75 cents, beating the Zacks Consensus Estimate of 74 cents. The figure came within the company’s earlier guided range of 70-75 cents.

The technical services company’s adjusted earnings reflected growth of 19% from the prior-year quarter figure of 63 cents. Its bottom line benefited from top-line growth on the back of solid demand for its high-end consulting and engineering services.

For fiscal 2018, the company’s ongoing earnings per share came in at $2.64, which met the guided range of $2.59-$2.64 and was up a robust 24% year over year, driven by impressive sales performance.

Top-Line Details

Revenues in the fiscal fourth quarter came in at $552.7 million, up 4% year over year. Notably, the figure came within the company’s estimated range of $550-575 million. However, the top line missed the Zacks Consensus Estimate of $572 million.

For fiscal 2018, the company’s net revenues came in at a record $2.20 billion, up 8% from the prior year and met the guided range of $2.20-$2.22 billion.

Segmental Break-Up

Revenues of the Government Services Group in the reported quarter came in at $310.8 million, up 10% year over year.

The Commercial / International Services Group revenues came in at $252.9 million, up 0.9%.

Costs & Margin

Subcontractor costs in the quarter under review were $186.6 million, down from $201.2 million recorded a year ago. Cost of revenues in the fiscal fourth quarter were $463.4 million, up 7%.

Selling, general and administrative expenses during the quarter were $42.4 million, down from $46.2 million recorded in the year-ago quarter. Meanwhile, interest expenses in the reported quarter flared up 41.3% to $3.9 million. Ongoing operating margin in the fiscal fourth quarter was 11%, up 30 basis points.

Liquidity & Cash Flow

Exiting the fiscal fourth quarter, Tetra Tech had cash and cash equivalents of $146.2 million, down from $190 million recorded on Oct 1, 2017. Long-term debt came in at $264.7 million, down from $341.3 million reported at the end of fiscal 2017.

For fiscal 2018, net cash from operating activities increased 28.2% year over year to $176.9 million.

Share Repurchase

Tetra Tech is strongly committed toward rewarding its shareholders through dividends and share buyback programs. On Nov 5, 2018, the company declared a quarterly dividend of 12 cents per share payable Dec 14, 2018, to stockholders on record as of Nov 30.

Outlook

Tetra Tech currently anticipates reporting revenues of $525-$575 million and earnings of 60-65 cents per share in first-quarter fiscal 2019.

Additionally, for fiscal 2019, Tetra Tech anticipates earnings to be in the range of $2.75-$2.95 per share. Also, net revenues for the fiscal is currently estimated to be $2.2-$2.4 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Tetra has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Tetra has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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