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Tetra Tech (TTEK) Q4 Earnings and Revenues Beat Estimates

Tetra Tech, Inc. TTEK kept its earnings beat streak alive in the fourth quarter of fiscal 2019 (ended September 29, 2019), with earnings surpassing estimates by 3.53%. This was the ninth consecutive quarter of impressive results.

The company’s adjusted earnings per share in the reported quarter were 88 cents, surpassing the Zacks Consensus Estimate of 85 cents. Also, its earnings grew 17.3% from the year-ago quarter’s 75 cents on strengthening businesses related to environmental, disaster response, renewable energy and other businesses.

For fiscal 2019, the company’s adjusted earnings per share were $3.17, up from the year-ago figure of $2.64.

Revenues & Segmental Performance

In the reported quarter, Tetra Tech generated adjusted revenues of $853.9 million, reflecting year-over-year growth of 14.3%. Alternatively, adjusted net revenues (adjusted revenues minus subcontractor costs) were $640.2 million, reflecting growth of 13.6% from the year-ago quarter.

Further, the company’s revenues surpassed the Zacks Consensus Estimate of $629 million by 0.22%.

Backlog at the end of the quarter was $3,092 million, reflecting growth of 16.1% from the year-ago figure.

Revenues from the U.S. Federal customers (accounted for 28% of the quarter’s revenues) rose 8% year over year on growth in environmental and water programs. Conversely, U.S. Commercial sales (23% of the quarter’s revenues) grew 1% year over year, driven by an increase in the U.S. renewable energy business. Also, the U.S. State and Local sales (17% of the quarter’s revenues) rose 31% on growth in disaster response & recovery planning as well as the broad-based infrastructure business. International sales (32% of the quarter’s revenues) improved 21% on growth in renewable energy and UK environmental businesses.

The company reports revenues under the segments discussed below:

Net sales of Government Services Group were $357.5 million, up 15% year over year. This improvement was driven by healthy growth in disaster response and recovery planning, and broad-based environmental and water programs.

Revenues from Commercial / International Services Group totaled $282.7 million, reflecting year-over-year growth of 11.8%. Results were driven by healthy growth in environmental consulting in the U.K. and the strengthening of renewable energy sales in North America.

For fiscal 2019, the company’s adjusted net revenues were $2,406.1 million, reflecting growth of 8.9% from the previous year.

Operating Margin

In the reported quarter, Tetra Tech’s subcontractor costs totaled $213.8 million, reflecting growth of 14.6% from the year-ago quarter. Other costs of revenues were $532.7 million, up 14.9% year over year. Selling, general and administrative expenses were $55.2 million, up 25.9% year over year.

Adjusted operating income in the reported quarter grew 5.1% year over year to $65 million, while adjusted margin declined 80 basis points year over year to 10.2%.

Balance Sheet and Cash Flow

Exiting the fiscal fourth quarter, Tetra Tech had cash and cash equivalents of $120.7 million, up 8.6% from $111.2 million recorded at the end of the last reported quarter. Long-term debt was down 18.6% sequentially to $263.9 million.

In fiscal 2019, the company generated net cash of $208.5 million from operating activities, 12.3% above the previous year. Capital expenditure was $16.2 million, up from $9.7 million in fiscal 2018.

During the year, the company bought back shares worth $100 million and distributed dividends totaling $29.7 million. It had $125-million authorization left under the share buyback program at the end of the fiscal fourth quarter.

A few days before the earnings release, the company’s board of directors approved a quarterly dividend payout of 15 cents per share to shareholders of record as of Dec 2. The payment will be made on Dec 13.

Outlook

For fiscal 2020 (ending September 2020), Tetra Tech anticipates sales from U.S. Federal clients to increase 5-10%, driven by growth in the U.S. Federal budget. It expects sales from U.S. Commercial clients to grow 3-8% on gains from green building design and environmental services.

Also, it anticipates that U.S. State and Local sales will increase 10-15% on strengthening disaster recovering and municipal water infrastructure businesses. It expects International sales growth of 7-12%, driven by environmental and infrastructure programs.

For fiscal 2020, the company anticipates net revenues of $2.4-$2.6 billion while adjusted earnings are predicted to be $3.35-$3.55 per share. For the fiscal year, it expects effective tax rate of 23%.

For the fiscal first quarter (ending December 2019), the company anticipates net revenues of $600-$640 million and earnings per share of 75-80 cents.

Tetra Tech, Inc. Price, Consensus and EPS Surprise

 

Tetra Tech, Inc. Price, Consensus and EPS Surprise

Tetra Tech, Inc. price-consensus-eps-surprise-chart | Tetra Tech, Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $4.8 billion, Tetra Tech currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Industrial Products sector are Sharps Compliance Corp. SMED, Casella Waste Systems, Inc CWST and Dover Corporation DOV. While Sharps Compliance sports a Zacks Rank #1 (Strong Buy), both Casella Waste and Dover carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for Casella Waste and Dover have improved for the current year, while have been unchanged for Sharps Compliance. Further, positive earnings surprise for the last reported quarter was 100% for Sharps Compliance, 15.63% for Casella Waste and 4.58% for Dover.

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