Tetra Tech Outperforms - Analyst Blog

Tetra Tech Inc. (TTEK) recorded another strong quarter performance, reporting earnings per share of 37 cents, above the Zacks Consensus Estimate of 33 cents. The company outperformed its bottom-line expectation of 31 cents to 34 cents for the quarter.

Earnings per share in the quarter were up 12.7% year over year as the company's front-end consulting and engineering services increased its coverage in range of customers.

For full fiscal year 2010, the company reported earnings per share of $1.24, below $1.43 in fiscal 2009, but above the Zacks Consensus Estimate of $1.19.

Revenues

Tetra Tech reported gross total revenue of $627.4 million versus $575.1 million in the fourth quarter of fiscal 2009. Total revenue, net of subcontractor costs, was $420.7 million, above $367.0 million in the prior-year quarter and $385 million as per the Zacks Consensus Estimate.

For fiscal 2010, total revenue, net of subcontractor costs, was $1.46 billion, above $1.39 billion in the prior year and $1.42 billion as per the Zacks Consensus Estimate. The company outperformed its expectation of $1.41 billion to $1.43 billion.

Backlog

The company's backlog increased to $1.85 billion at the end of fiscal 2010 from $1.58 billion at the end of fiscal 2009 and from $1.68 billion at the end of the third quarter of fiscal 2010.

Income

Operating income was $37.1 million compared with $32.7 million in the fourth quarter of 2009. Net income was $23.1 million compared with $20.5 million.

Cash Flow

The company generated cash from operations of $42.3 million in the quarter compared with $90.8 million in the same period last year. Cash from operations included a tax refund of $39.8 million in the prior year.

Cash flow from operations in fiscal 2010 was $106.8 million compared with $198.2 million in fiscal 2009.

Outlook

The company expects diluted EPS for the first quarter of 2011 to be in the range of 31 cents to 33 cents and total revenue, net of subcontractor costs, to be in the range of $380 million to $410 million.

For fiscal 2011, Tetra Tech expects diluted EPS to be in the range of $1.28 to $1.40 and total revenue, net of subcontractor costs, to be in the range of $1.6 billion to $1.7 billion. The company anticipates an increased backlog in fiscal 2011, driven by acquisition of BPR, a scientific and engineering services firm, and increased demand for Tetra Tech's front-end services, which would offset low back-end services demand.

Tetra Tech continues to focus on the strategic acquisition of the firms to enhance its service offerings and expand its geographic presence. However, an exceedingly slow economic recovery will continue to affect the performance of the company.

Headquartered in Pasadena, California, Tetra Tech Inc. provides environmental engineering and consultancy services to both government and corporate clients. The company provides about 50% of its management consultancy services to the US Agency for International Development for its various projects worldwide in energy sector. Prime competitors of the company are Arcadis NV (ARCAY), Shaw Group Inc. (SHAW) and URS Corp. (URS).

We currently maintain our Neutral rating on Tetra Tech for the long term. For the short term, the company has a Zacks #2 Rank (Buy).