A month has gone by since the last earnings report for Tetra Tech (TTEK). Shares have lost about 18.8% 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 drivers.
Tetra Tech reported first-quarter fiscal 2025 (ended Dec. 29, 2024) adjusted earnings of 35 cents per share, which surpassed the Zacks Consensus Estimate of 34 cents. The company’s adjusted earnings per share surpassed the management’s guided range of 32-34 cents. The bottom line surged 25% year over year, driven by the strong momentum in each of its segments.
Tetra Tech generated revenues of $1.42 billion, reflecting a year-over-year increase of 16%. Adjusted net revenues (adjusted revenues minus subcontractor costs) were $1.2 billion, up 18% year over year. The quarterly top line surpassed the management’s guided range of $1.09-$1.15 billion.
Tetra Tech’s adjusted net revenues also exceeded the Zacks Consensus Estimate of $1.1 billion.
The backlog at the end of the fiscal first quarter was $5.44 billion, up 15% year over year.
Revenues from U.S. Federal customers (accounting for 34% of the quarter’s revenues) were up 32% year over year, supported by a solid pipeline of projects from USAID and strength in the federal sector. U.S. Commercial sales (17% of the quarter’s revenues) increased 7% year over year, driven by higher environmental services sales.
U.S. State and Local sales (14% of the quarter’s revenues) increased 47% year over year, driven by strength in advanced water treatment and disaster response. International sales (35% of the quarter’s revenues) were up 4% year over year, backed by strength in the U.K. water consulting sector.
Tetra Tech reports revenues under the segments discussed below:
Net sales of the Government Services Group segment were $601.2 million, up 36% year over year. Revenues from the Commercial/International Services Group segment totaled $596.2 million, representing a year-over-year increase of 4%.
In the fiscal first quarter, Tetra Tech’s subcontractor costs totaled $223.3 million, reflecting an increase of 4.8% from the year-ago quarter. Other costs of revenues (adjusted) were $975.9 million, up 18.3% from the first quarter of fiscal 2024. Selling, general and administrative expenses (adjusted) were $84 million, up 5.7% from the year-ago fiscal quarter.
Adjusted operating income increased 23.9% year over year to $137.5 million while the adjusted margin increased 60 basis points to 11.5%.
While exiting the fiscal first quarter, Tetra Tech had cash and cash equivalents of $248.1 million compared with $232.7 million recorded at the end of the fourth quarter of fiscal 2024. Long-term debt was $888.4 million compared with $812.6 million recorded at the end of fourth-quarter fiscal 2024.
In the first three months of fiscal 2025, Tetra Tech generated net cash of $13.1 million from operating activities compared with $9.2 million in the prior fiscal year period. Capital expenditure was $3.4 million, relatively stable year over year. In fiscal 2024, its proceeds from borrowings amounted to $90 million while repayments on long-term debt totaled $15 million.
Tetra Tech distributed dividends totaling $15.5 million in the first three months of fiscal 2025. This compares favorably with dividends of $13.9 million distributed in the previous fiscal year period. It repurchased shares worth $25 million in the same period.
For fiscal 2025 (ending September 2025), Tetra Tech anticipates net revenues to be in the range of $4.365-$4.765 billion compared with $4.565-$4.765 billion expected earlier. The projection is favorably comparable to net revenues of $4.322 billion reported in fiscal 2024. Adjusted earnings are predicted to be $1.37-$1.52 per share compared with $1.40-$1.50 expected earlier. It reported earnings of $1.26 per share in fiscal 2024.
For the fiscal second quarter (ending March 2025), management estimates net revenues to be in the range of $1.0-$1.1 billion. Adjusted earnings are projected to be in the band of 30-33 cents per share.
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -9.09% due to these changes.
Currently, Tetra has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Tetra has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
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