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Tetra Tech (TTEK) Q3 Earnings & Revenues Top Estimates, Up Y/Y

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Tetra Tech, Inc. TTEK reported solid third-quarter fiscal 2021 (ended Jun 27, 2021) results, with earnings surpassing estimates by 9.2%. This was the 16th consecutive quarter of better-than-anticipated results.

Its share price decreased 0.7% yesterday, ending the trading session at $129.99.

The company’s adjusted earnings per share in the reported quarter came in at 95 cents, outpacing the Zacks Consensus Estimate of 87 cents. Earnings increased 21.8% from the year-ago quarter’s 78 cents.

The bottom line also topped management’s projection of 85-90 cents per share.

Revenues & Segmental Performance

In the fiscal third quarter, Tetra Tech generated adjusted revenues of $801.5 million, reflecting a year-over-year increase of 12.9%. Adjusted net revenues (adjusted revenues minus subcontractor costs) came in at $638 million, up 13.9%. The figure came within the company’s guidance of $600-$650 million.

Tetra Tech’s revenues also exceeded the Zacks Consensus Estimate of $630 million.

Backlog at the end of the quarter was $3,249.9 million, up 3.2% from the previous quarter.

Revenues from the U.S. Federal customers (accounting for 29% of the quarter’s revenues) were up 7% year over year. Revenues increased from growth in advanced analytics and international development projects.

The U.S. Commercial sales (21% of the quarter’s revenues) declined 2% year over year on discretionary industrial programs timing. Stability was witnessed in regulatory-driven programs.

The U.S. State and Local sales (16% of the quarter’s revenues) increased 31% on strength across municipal infrastructure and disaster response. International sales (34% of the quarter’s revenues) increased 26% year over year, backed by strength across commercial discretionary and government projects.

The company reports revenues under the segments discussed below:

Net sales of Government Services Group came in at $356 million, up 12% year over year.

Revenues from Commercial / International Services Group totaled $282 million, underlining a year-over-year increase of 17%.

Margin Profile

In the fiscal third quarter, Tetra Tech’s subcontractor costs totaled $163.6 million, reflecting a rise of 9.4% from the year-ago quarter. Other costs of revenues (adjusted) were $512.3 million, up 14.9%. Selling, general and administrative expenses (adjusted) were $55.9 million, up 10%.

Net income in the reported quarter increased 14.1% year over year to $51.9 million, while adjusted margin expanded 30 basis points to 10.9%.

Balance Sheet and Cash Flow

Exiting the fiscal third quarter, Tetra Tech had cash and cash equivalents of $234.3 million, up 4% from $225.3 million recorded at the end of the prior quarter. Long-term debt was down 1.8% sequentially to $234 million from $238.3 million.

In the first nine months of fiscal 2021, it generated net cash of $226.5 million from operating activities compared with $194.6 million in the year-ago period. Capital expenditure was $6.2 million, down 34%. In the same time frame, the company’s proceeds from borrowings amounted to $165.6 million, while repayments totaled $173.9 million.

Shareholder-Friendly Policies

In the first nine months of fiscal 2021, the company bought back shares worth $45 million and distributed dividends totaling $29.2 million.

Exiting the fiscal third quarter, the company had $163 million worth authorization left under its approved buyback programs.

On Jul 26, 2021, the company’s board of directors approved the payment of a quarterly cash dividend of 20 cents per share. The company will pay out the dividend on Sep 3 to shareholders on record as of Aug 20, 2021.

Outlook

For fiscal 2021 (ending September 2021), Tetra Tech anticipates net revenues of $2.50-$2.55 billion compared with $2.45-$2.55 billion guided earlier, and adjusted earnings are predicted to be $3.69-$3.74 compared with $3.60-$3.70 estimated earlier. The bottom-line projection is higher than the $3.26 recorded in fiscal 2020.

For the fiscal fourth quarter (ending September 2021), the company estimates net revenues of $650-$700 million and adjusted earnings per share of 95 cents to $1.00.

Tetra Tech, Inc. Price, Consensus and EPS Surprise

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

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are AZZ Inc. AZZ, Brady Corporation BRC and Donaldson Company, Inc. DCI. While AZZ currently sports a Zacks Rank #1 (Strong Buy), Brady and Donaldson carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AZZ delivered an earnings surprise of 21.24%, on average, in the trailing four quarters.

Brady delivered an earnings surprise of 1.58%, on average, in the trailing four quarters.

Donaldson delivered an earnings surprise of 9.02%, on average, in the trailing four quarters.


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