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Tetra Tech Buys eGlobalTech, Boosts Government Services Unit

Zacks Equity Research

Tetra Tech, Inc. TTEK announced yesterday that it acquired Arlington, VA-based eGlobalTech. Financial terms of the transaction have been kept under wraps.

eGlobalTech specializes in providing management consultancy, IT solutions and cybersecurity to customers, especially the federal government.

It is worth mentioning here that the company’s stock price increased roughly 0.8% at the close of the trading session on Apr 3, 2019. The closing price on that day was $59.96.

Details of Buyout

As noted by Tetra Tech, the eGlobalTech buyout will strengthen its ability to better serve customers with innovative solutions — including data analytics, artificial intelligence and cybersecurity measures. In addition, this buyout is predicted to solidify Tetra Tech’s business from government and commercial customers. Also, new businesses are anticipated from the U.S. Department of Health and Human Services.

The company will integrate eGlobalTech with its Government Services Group. This segment, which engages in serving the U.S. government clients (federal, state and local) and development agencies, generated roughly 54.8% of revenues in the first quarter of fiscal 2019 (ended December 2018).

Buyout Strategies

The above-mentioned transaction is consistent with Tetra Tech’s policy of acquiring businesses to improve product lines and market exposure. In fiscal 2018 (ended September 2018), the company acquired Oregon-based Glumac and Australia-based Norman Disney & Young. While Glumac has been strengthening Tetra Tech’s Government Services Group segment, Norman Disney & Young added vigor to the Commercial/International Services Group segment.

Zacks Rank & Stocks to Consider

With a market capitalization of nearly $3.3 billion, Tetra Tech currently carries a Zacks Rank #3 (Hold). In the quarters ahead, it stands to benefit from strengthening business in four client sectors — the U.S. federal, the U.S. state and local, the U.S. commercial and international. However, increase in costs remains concerning.

In the past three months, Tetra Tech’s shares have increased 18.3% versus the industry’s growth of 18.9%.

In the past 60 days, earnings estimates for Tetra Tech remained unchanged at $2.98 for fiscal 2019 (ending September 2019) and $3.26 for fiscal 2020 (ending September 2020). On a year-over-year basis, these estimates represent growth of 12.9% for fiscal 2019 and 9.4% for fiscal 2020.

Tetra Tech, Inc. Price and Consensus


Tetra Tech, Inc. Price and Consensus | Tetra Tech, Inc. Quote

Some better-ranked stocks in the Zacks Industrial Products sector are DXP Enterprises, Inc. DXPE, Sun Hydraulics Corporation SNHY and Roper Technologies, Inc. ROP. While DXP Enterprises and Sun Hydraulics currently sport a Zacks Rank #1 (Strong Buy), Roper carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for all these three stocks have improved for the current year. Further, average earnings surprise for the last four quarters was a positive 46.55% for DXP Enterprises, 2.27% for Sun Hydraulics and 4.96% for Roper.

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