Why Analog Devices (ADI) is Poised to Beat Earnings Estimates Again
Tetra Tech Inc. TTEK reported second-quarter fiscal 2018 adjusted earnings of 54 cents per share from ongoing operations, which surpassed the Zacks Consensus Estimate of 51 cents. Notably, earnings exceeded the company’s earlier guided range of 48-53 cents.
Also, the bottom line increased 12.5% from the prior-year quarter’s tally of 48 cents. The year-over-year improvement was backed by broad based growth, led by increased work for its U.S. state and local clients.
Inside the Headlines
Net revenues increased 4.1% year over year to $532.8 million, comfortably beating the Zacks Consensus Estimate of $515.3 million. The top-line figure also came ahead the upper end of the company’s estimated range of $490-$515 million. Moreover, Tetra Tech’s ongoing revenues recorded an increase of 5% year over year.
Segment-wise, Government Services Group’s revenues grew 11.2% year over year to $290.5 million, primarily driven by increase in infrastructure projects.
Net revenues from Commercial / International Services Group declined 4.9% year over year to $241.9 million. However, the downturn was partially offset by an increase in environmental projects.
Tetra Tech, Inc. Price, Consensus and EPS Surprise
Tetra Tech, Inc. Price, Consensus and EPS Surprise | Tetra Tech, Inc. Quote
In the reported quarter, backlog from ongoing operations reached $2.51 billion, an increase of 0.5% year over year. Further, ongoing operating income was up 1.9% year over year to $45.1 million.
At the end of the second quarter, Tetra Tech’s cash and cash equivalents were $203.2 million, up from $171.3 million a year ago. Also, the company’s long-term debt totaled $463.5 million, up from $341.3 million as of Oct 1, 2017.
Tetra Tech remains highly committed toward rewarding shareholders through dividends and share buyback programs. Earlier, the company had authorized a new program to repurchase up to $200 million of common stock, under which it has $50 million remaining.
On Apr 30, 2018, Tetra Tech declared a 20% hike in the quarterly dividend, increasing it to 12 cents per share payable on Jun 1 to stockholders of record as of May 16.
Concurrent with the quarterly earnings release, Tetra Tech also issued revenue and earnings guidance for both the third quarter and fiscal 2018.
The company anticipates third-quarter earnings per share to be in the range of 62-68 cents. Net revenues for the same quarter is projected between $525 million and $555 million.
For fiscal 2018, the company raised its earnings per share guidance. It now envisions earnings in the band of $2.50-$2.62 per share compared with the earlier guided range of $2.40–$2.60.
Also, based on the current market scenario, Tetra Tech revised its revenue guidance for fiscal 2018. Revenues are anticipated to lie within $2.15-$2.25 billion band, instead of the earlier guided range of $2.10-$2.20 billion.
Tetra Tech ended the second quarter on an impressive note, with better-than-expected top- and bottom-line performance and year-over-year growth. Additionally, the company seems to be enjoying steady top-line momentum and improved operating efficiency owing to cost-management initiatives.
Based on continued execution of its business model, Tetra Tech remains confident about its growth across all four client sectors, namely U.S. federal, U.S. state and local, U.S. commercial work, and international. This apart, the company’s diligent capital deployment strategies as well as a robust pipeline of infrastructure projects bode well for days ahead.
However, Tetra Tech remains vulnerable to sluggish oil and gas markets. Also, contraction in its oil and gas midstream services revenues may restrict the company’s top-line growth.
Tetra Tech currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks worth considering in the same space include Applied Industrial Technologies, Inc. AIT, Avery Dennison Corporation AVY and Heritage-Crystal Clean, Inc. HCCI. While Applied Industrial Technologies sports a Zacks Rank #1 (Strong Buy), Avery Dennison and Heritage-Crystal Clean carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies has an excellent earnings surprise history, having surpassed estimates in the trailing four quarters, with an average beat of 11.6%.
Avery Dennisonhas an impressive earnings surprise history, having exceeded estimates in the trailing four quarters, with an average beat of 7%.
Heritage-Crystal Clean has a decent earnings surprise history, having outpaced estimates thrice in the trailing four quarters, with an average beat of 18.5%.
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