Tetra Tech, Inc.
) recently revised its third quarter 2013 guidance to factor in
the impacts of increased restructuring costs from weakness in
Eastern Canada and mining. Costs have also increased owing to new
findings on certain project claims. During the second quarter
earnings call on May 2, 2013, Tetra Tech had mentioned about
prevailing weakness in Eastern Canada and mining to adversely
impact its business in the upcoming quarters.
Tetra Tech projects these charges to affect the revenue and
earnings of all three operating segments. The company now expects
revenue for the third quarter (net of subcontractor costs) in the
range of $440 million to $490 million. The company expects to
incur a loss in the quarter ranging between 30 cents and 50 cents
a share, primarily due to the one-time charges that it expects to
Apart from this, the board of directors authorized a $100
million common stock repurchase program.
Third-quarter restructuring costs are now expected to be $50
million, of which $40 million are non-recurring in nature. The
increase in restructuring costs is primarily attributable to
downsizing of operations as weak economic conditions hamper
project demand. Approximately two-thirds of the costs are related
to Eastern Canada operations, while about one-third is related to
its mining operations. Depending on these expected costs, Tetra
Tech will calculate its goodwill impairment charge and will
inform investors during the third quarter earnings release.
Tetra Tech's restructuring initiatives are promising as they
are in line with the changes in the market. Right-sizing its
operations may help the company to return to its historical
profit levels and improve margins.
In addition, Tetra Tech received unfavorable findings
primarily associated with claims on four programs during the
quarter. Tetra Tech will thus record a charge while continuing
with the dispute resolution processes. These claims are related
to change orders for certain U.S. federal and state government
projects that are facing budget constraints. These charges are
expected to total around $45 million.
During the second quarter earnings release, Tetra Tech had
lowered its fiscal 2013 earnings per share and revenue guidance.
For fiscal 2013, earnings per share are expected to be in the
range of $1.60 to $1.75, down from its prior guidance of $1.85 to
$1.96. Management also lowered its upper end of revenue guidance
and pegged revenue, net of subcontractor cost, in the range of
$2.15 billion to $2.25 billion compared with its prior guidance
of $2.15 billion to $2.35 billion.
Tetra Tech currently has a Zack Rank #3 (Hold). Some other
companies in the industry worth mentioning are
CECO Environmental Corp
), having a Zacks Rank #1 (Strong Buy), and
Calgon Carbon Corporation
Orion Marine Group Inc
), each carrying a Zacks Rank #2 (Buy).
CALGON CARBON (CCC): Free Stock Analysis
CECO ENVIRNMNTL (CECE): Free Stock Analysis
ORION MARINE GP (ORN): Free Stock Analysis
TETRA TECH NEW (TTEK): Free Stock Analysis
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