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Tetra Tech, Inc. TTEK will be a promising investment move if the stock is added to your portfolio at the moment. The stock currently carries a Zacks Rank #2 (Buy) and has secured promising returns in the past three months.
Why Should You Grab the Stock?
Sound Business Strategy: Tetra Tech’s current business strategy focuses on margin expansion and growth across high-end service businesses. In line with this, the company is currently investing in and expanding its high-end consulting services business. The company believes this strategy will aid in boosting its top- and bottom-line performances in the quarters ahead.
Revenue Prospects: Tetra Tech’s year-over-year revenue growth was 7.5% and 6.6% in the first nine months of fiscal 2018 (ended June 2018) and fiscal 2017 (ended September 2018), respectively. Notably, the company booked new orders of more than $700 million in third-quarter fiscal 2018. Tetra Tech anticipates that strength in international development business and stronger demand for its water infrastructure services will continue to improve revenues of the Government Services Group segment. On the other hand, increased infrastructure services provided in overseas markets, like Australia, Canada and South America, as well as improved oil and gas business in the United States (commercial) will bolster its Commercial / International Services Group segment revenues.
Tetra Tech currently revised its revenue view for fiscal 2018 (ending September 2018) from $2.15-$2.25 billion to $2.20-$2.22 billion. Per our estimates, the company’s year-over-year revenue growth is currently pegged at 9.2% and 4.4% for fiscals 2018 and 2019, respectively.
Profitability: Tetra Tech pulled off an average positive earnings surprise of 10.85% over the last four quarters. The company’s adjusted earnings in third-quarter fiscal 2018 outpaced the Zacks Consensus Estimate by 9.2% and also came in 34% higher than the year-ago tally. The company expects that stronger top-line performances and operational excellence will drive its bottom-line figures in the quarters ahead.
Tetra Tech currently anticipates generating earnings within the range of $2.59-$2.64 per share in fiscal 2018, higher than the prior view of $2.50-$2.62 per share. Per our estimates, the company’s year over year earnings growth is currently pegged at 24.9% and 7.7% for fiscals 2018 and 2019, respectively.
Over the past three months, Tetra Tech’s shares have rallied 26.5%, outperforming 12.5% growth recorded by the industry.
Inorganic Pose: In sync with the ongoing business strategy, Tetra Tech is slightly reshaping its business portfolio, of late. At the end of the fiscal third quarter, the company divested some of its non-core business assets. Meanwhile, the company is poised to strengthen its competency on the back of strategic business acquisitions. For instance, the acquisition of Bridgenet International Inc. (January 2018) has remarkably fortified the company’s life-cycle aviation services business. Additionally, the buyout of Norman Disney & Young (August 2018) is expected to boost Tetra Tech’s Commercial and International Business Group’s business.
Organic Growth: Tetra Tech predicts that new contract wins will continue to reinforce its revenues and profitability in the near future. In this context, $85-million single-award deal won from the U.S. Agency for International Development (July 2018), $60 million five-year long contract secured from the U.S. Army Corps of Engineers, Portland District (June 2018), and another $22-million single-award deal provided by the U.S. Agency for International Development (June 2018) are worth mentioning.
Strong Capital Deployment Strategy: Tetra Tech’s capital-deployment strategy focuses on investing in new businesses, lowering debt and increasing shareholders returns. In the fiscal third quarter, the company repurchased $25 million of shares and provided dividends worth $5.6 million.
Other Key Picks
Some other top-ranked stocks in the same space are listed below:
Energy Recovery, Inc. ERII sports a Zacks Rank #1 (Strong Buy). The company pulled off an average positive earnings surprise of 261.1% in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Advanced Emissions Solutions, Inc. ADES carries a Zacks Rank of 2. The company delivered an average positive earnings surprise of 16.40% over the trailing four quarters.
Vertex Energy, Inc VTNR also holds a Zacks Rank of 2. The company came up with an average positive earnings surprise of 36.67% during the same time frame.
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