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Tetra Tech Delivers In-Line Q3 Earnings, Narrows Guidance - Analyst Blog

Tetra Tech Inc.TTEK reported third-quarter fiscal 2015 results, with earnings from operations of 43 cents per share coming in line with the Zacks Consensus Estimate. However, earnings per share (EPS) increased 39% on a year-over-year basis.

The company's bottom-line performance benefited from operating efficiency and stringent cost management. Moreover, increased demand for the company's water and environmental services from both commercial and government clients contributed to the improvement in bottom line.

Inside the Headlines

Revenues, net of subcontractor costs, fell 8% year over year to $421.9 million. The figure also lagged the Zacks Consensus Estimate of $455 million.

Revenues were affected by the divestiture of the Remediation and Construction Management division. Also, two of the company's reporting segments witnessed a fall in their sales, thus adversely affecting the top-line performance.

Water, Environment and Infrastructure segment's net revenue fell 2.6% year over year to $182.3 million.

Also, Resource Management and Energy segment's net revenue declined 6.1% year over year to $233.8 million.

Revenues in both the above-mentioned segments were hurt by high subcontractor expenses. The nature of the company's contracts call for additional costs charged by subcontractors, vendors and material suppliers.

In the quarter under review, total backlog level fell 3.6% year over year to $1.8 billion. Despite a decline in backlog, the company recorded $1.4 billion worth new awards received from the U.S. federal government clients during the quarter.

Operating income increased 3.8% year over year to $40.7 million.

Liquidity & Cash Flow

As of Jun 28, 2015, Tetra Tech's cash and cash equivalents were $175.2 million compared with $122.4 million as of Sep 28, 2014. Long-term debt stood at $225.5 million compared with $192.8 million as of Sep 28, 2014.

As of Jun 28, 2015, the company's cash from operations escalated 17% year over year to $134.1 million.

In the first nine months of fiscal 2015 (ended Jun 28), the company spent $75.5 million under the previously approved $200-million share repurchase program.

Outlook Revised

Tetra Tech revised its guidance for fiscal 2015 EPS to the range of $1.63-$1.67 (the prior range being $1.60-$1.70). The company has also curtailed its net revenue expectations, presently projecting it in a range of $1.71-$1.74 billion (previous range being $1.70-$1.85 billion).

For the fourth quarter of fiscal 2015, the company expects EPS in the range of $0.48-$0.52, while anticipating net revenue within $420-$450 million.

To Conclude

Tetra Tech boasts a solid liquidity position that will act as one of its major strengths going forward, providing investment opportunities for both organic and inorganic growth plans. This apart, the company's robust backlog levels, coupled with its multi-billion government contracts, are also expected to be a key catalyst for growth.

Tetra Tech currently carries a Zacks Rank #2 (Buy). Other favorably ranked stocks in the same sector include Advanced Emissions Solutions, Inc. ADES , Pall Corporation PLL and Perma-Fix Environmental Services Inc. PESI . All three stocks carry the same Zacks Rank as Tetra Tech.

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TETRA TECH NEW (TTEK): Free Stock Analysis Report

PERMA-FIX ENVIR (PESI): Free Stock Analysis Report

ADV EMISSIONS (ADES): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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