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Tetra Tech (TTEK) Q3 Earnings and Revenues Surpass Estimates

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Tetra Tech, Inc. TTEK reported better-than-expected results for third-quarter fiscal 2022 (ended June 2022). Earnings beat the Zacks Consensus Estimate by 2.9%, marking the 20th consecutive quarter of delivering a surprise. Sales also surpassed estimates by 0.9%.

Tetra Tech’s adjusted earnings per share in the reported quarter were $1.08, surpassing the Zacks Consensus Estimate of $1.05. Quarterly earnings expanded 13.7% from the year-ago quarter’s reported figure of 95 cents.

The bottom line also surpassed management’s projection of $1.00-$1.05 per share.

Revenue & Segmental Performance

In the fiscal third quarter, Tetra Tech generated adjusted revenues of $890 million, reflecting a year-over-year increase of 11%. Adjusted net revenues (adjusted revenues minus subcontractor costs) were $720 million, up 13% year over year. The quarterly top line came above management’s guidance of $665-$715 million.

Tetra Tech’s revenues exceeded the Zacks Consensus Estimate of $714 million.

Backlog at the end of the quarter was $3,512.5 million, up 8% year over year.

Revenues from the U.S. Federal customers (accounting for 27% of the quarter’s revenues) were up 4% year over year. The U.S. Commercial sales (22% of the quarter’s revenues) increased 19% year over year on higher environmental programs.

The U.S. State and Local sales (16% of the quarter’s revenues) increased 10% on strength in the municipal infrastructure. International sales (35% of the quarter’s revenues) increased 18% year over year, backed by strength in Government and commercial segments.

Tetra Tech reports revenues under the segments discussed below:

Net sales of Government Services Group were $338 million, up 9% year over year. Revenues from the Commercial/International Services Group totaled $362 million, representing a year-over-year increase of 25%.

The U.S. State and Local sales (18% of the quarter’s revenues) increased 25% on strength across municipal infrastructure. International sales (34% of the quarter’s revenues) increased 29% year over year, backed by strength in Government and commercial segments.

Tetra Tech reports revenues under the segments discussed below:

Net sales of the Government Services Group were $335 million, up 6% year over year. Revenues from the Commercial/International Services Group totaled $385 million, underlining a year-over-year increase of 19%.

Tetra Tech, Inc. Price and Consensus

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

Tetra Tech, Inc. price-consensus-chart | Tetra Tech, Inc. Quote

Margin Profile

In the fiscal second quarter, Tetra Tech’s subcontractor costs totaled $169.7 million, reflecting an increase of 3.7% from the year-ago quarter’s level. Other costs of revenues were $575.9 million, up 12.4%. Selling, general and administrative expenses were $60.7 million, up 8.6% from the year-ago quarter’s figure.

Operating income (adjusted) in the reported quarter increased 18.8% year over year to $82.9 million, while the adjusted margin expanded 60 basis points to 11.5%.

Balance Sheet and Cash Flow

At the time of exiting the fiscal third quarter, Tetra Tech had cash and cash equivalents of $217.4 million, up 30.5% from $166.6 million recorded at the end of the fourth quarter of fiscal 2021. Long-term debt increased 17.2% from $200 million recorded at the end of fourth-quarter fiscal 2021 to $234.4 million.

In the first nine months of fiscal 2022, Tetra Tech generated net cash of $276 million from operating activities compared with $226.5 million in the last fiscal year’s comparable period. Capital expenditure was $8.4 million, up 35.5% year over year. In the said period, TTEK’s proceeds from borrowings amounted to $141.5 million, while repayments totaled $108.9 million.

Shareholder-Friendly Policies

Tetra Tech bought back shares worth $150 million and distributed dividends totaling $33.9 million in the first nine months of fiscal 2022. These compare favorably with the share buybacks of $45 million and dividends of $29.2 million distributed in the first nine months of fiscal 2021.

While exiting the fiscal third quarter, TTEK had $398 million worth of authorization left under its approved buyback programs.

On Aug 3, 2022, Tetra Tech’s board of directors approved a quarterly cash dividend of 23 cents per share, up 15% from the previous year’s payout. TTEK will pay out the dividend on Aug 26 to its shareholders of record as of Aug 12, 2022.

Outlook

For fiscal 2022 (ending September 2022), Tetra Tech anticipates net revenues of $2.78-$2.83, higher than $2.72-$2.82 billion expected previously. Adjusted earnings are predicted to be $4.38-$4.43, up from the previously guided range of $4.30-$4.40.

For the fourth quarter of fiscal 2022 (ending September 2022), management estimates net revenues of $676-$726 million and adjusted earnings per share of $1.13-$1.18.

Zacks Rank & Stocks to Consider

TTEK currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the industrial products sector are discussed below:

Greif, Inc. GEF presently sports a Zacks Rank #1 (Strong Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

GEF’s earnings estimates have increased 17.8% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 21% in the past six months.

Titan International, Inc. TWI presently flaunts a Zacks Rank of 1. Its earnings surprise in the last four quarters was 47%, on average.

In the past 60 days, TWI’s earnings estimates have increased 52.2% for 2022. The stock has surged 47% in the past six months.

Valmont Industries, Inc. VMI presently has a Zacks Rank #2 (Buy). VMI’s earnings surprise in the last four quarters was 13.7%, on average.

In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 29.2% in the past six months.


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