Why Is Tetra (TTEK) Up 1.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Tetra Tech (TTEK). Shares have added about 1.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Tetra due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Tetra Tech Beats on Q3 Earnings, Raises 2024 Guidance
Tetra Tech reported third-quarter fiscal 2024 (ended Jun 30, 2024) adjusted earnings of $1.59 per share, which surpassed the Zacks Consensus Estimate of $1.54. The bottom line surged 42% year over year, driven by the strong momentum in each of its segments.
The bottom line also surpassed management’s earnings projection of $1.50-$1.55 per share.
Revenue & Segmental Performance
Tetra Tech generated revenues of $1.34 billion, reflecting a year-over-year increase of 11%. Adjusted net revenues (adjusted revenues minus subcontractor costs) were $1.11 billion, up 12% year over year. The quarterly top line surpassed the management’s guided range of $1.05-$1.10 billion.
Tetra Tech’s adjusted revenues also exceeded the Zacks Consensus Estimate of $1.09 billion.
The backlog at the end of the fiscal third quarter was $5.23 billion, up 19% year over year.
Revenues from U.S. Federal customers (accounting for 30% of the quarter’s revenues) were up 34% year over year, supported by higher civilian and defense environmental sales. U.S. Commercial sales (19% of the quarter’s revenues) increased 7% year over year, driven by higher renewable energy and environmental remediation sales.
U.S. State and Local sales (11% of the quarter’s revenues) increased 8% year over year, driven by strength in advanced water treatment. International sales (40% of the quarter’s revenues) were up 5% year over year, backed by increased Canadian and Australian sustainable infrastructure sales.
Tetra Tech reports revenues under the segments discussed below:
Net sales of the Government Services Group segment were $488 million, up 25% year over year. Revenues from the Commercial/International Services Group segment totaled $621 million, representing a year-over-year increase of 4%.
Margin Profile
In the fiscal third quarter, Tetra Tech’s subcontractor costs totaled $234.7 million, reflecting an increase of 6% from the year-ago quarter. Other costs of revenues (adjusted) were $886.4 million, up 11% from the fiscal third quarter of 2023. Selling, general and administrative expenses (adjusted) were $94.5 million, up 6.1% from the year-ago fiscal quarter.
Operating income increased 32% year over year to $129 million while the adjusted margin increased 150 basis points to 11.6%.
Balance Sheet and Cash Flow
While exiting the fiscal third quarter, Tetra Tech had cash and cash equivalents of $212.3 million compared with $168.8 million recorded at the end of the fourth quarter of fiscal 2023. Long-term debt was $861.8 million compared with $879.5 million recorded at the end of fourth-quarter fiscal 2023.
In the first nine months of fiscal 2024, Tetra Tech generated net cash of $253.1 million from operating activities compared with $246.1 million in the prior fiscal year’s comparable period. Capital expenditure was $11.3 million, down 34.7% year over year. In the said fiscal period, TTEK’s proceeds from borrowings amounted to $180 million while repayments on long-term debt totaled $200 million.
Shareholder-Friendly Policies
Tetra Tech distributed dividends totaling $43.3 million in the first nine months of fiscal 2024. This compares favorably with dividends of $38.3 million distributed in the year-ago fiscal period. It repurchased shares worth $12.9 million in the same period.
Fiscal 2024 Outlook Raised
For fiscal 2024 (ending September 2024), Tetra Tech anticipates net revenues to be in the range of $4.27-$4.32 billion compared with $4.21-$4.31 billion expected earlier. Adjusted earnings are predicted to be $6.23-$6.28 per share compared with $6.15-$6.25 predicted earlier.
For the fiscal fourth quarter (ending September 2024), management estimates net revenues to be in the range of $1.09-$1.14 billion. Adjusted earnings are projected to be $1.82-$1.87 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Tetra has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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 has been net zero. Notably, Tetra has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Tetra Tech, Inc. (TTEK) : Free Stock Analysis Report