Tetra Tech Inc. (TTEK) reported fourth-quarter and fiscal 2014 (ended Sep 28, 2014) results. The company‘s quarterly earnings of 35 cents per share came in line with the Zacks Consensus Estimate. However, the bottom line declined 10.3% compared with 39 cents reported in the prior-year quarter.
For fiscal 2014, the company’s earnings of $1.66 per share marked a significant turnaround from loss of 3 cents per share reported in fiscal 2013.
Earnings benefited from strength in the company’s front-end businesses – Engineering and Consulting Services (ECS) and the Technical Support Services (TSS). Also, Tetra Tech recently took some strategic restructuring initiatives to dissolve its Remediation and Construction Management (RCM) segment which had been facing persistent sluggishness on unfavorable conditions in the construction market. The company will be exiting the high-risk, low-return non-core construction markets of its RCM business, while retaining businesses like environmental remediation, pipeline, solid waste and utilities. Post restructuring, the primary RCM business will be absorbed into the front-end engineering and consulting businesses of the company.
Operational Details
Total revenue for the quarter decreased 10.9% to $622.2 million from $698.4 million in the prior-year period. Revenues, net of subcontractor costs, came in at $462.2 million as compared with $531.5 million in the year-ago quarter.
Total revenue for fiscal 2014 came in at $2.48 billion, down 5% from $2.61 billion reported in the preceding year. Revenues, net of subcontractor costs, also decreased to $1.9 billion as compared with $2 billion in fiscal 2013.
Consolidated revenues for ECS and TSS segments were $493.8 million in the fourth quarter and $1.88 billion for fiscal 2014. Revenues, net of subcontractor costs, for ECS and TSS came in at $380.3 million for the quarter and $1.47 billion for the fiscal year.
Backlog levels increased 5% year over year to $2.01 billion in the quarter.
Other Financial Details
Tetra Tech’s cash from operations amounted to $13.1 million while for fiscal 2014 the figure was $127.4 million.
In the reported quarter, the company completed its $100 million share repurchase program. Further, Tetra Tech intends to buy back additional shares worth $200 million over the next couple of years.
Business Update
The company’s restructuring initiatives are likely to be completed by the beginning of fiscal 2015. Thereafter, Tetra Tech will be reporting its businesses under two segments, namely, Water, Environment and Infrastructure (WEI) and Resource Management and Energy (RME). WEI will consist of company’s federal water, environment, and infrastructure businesses while RME will include Tetra Tech’s oil and gas, energy, global mining, waste management, remediation, utilities as well as international development businesses.
Outlook
The company provided guidance for first-quarter and fiscal 2015.
Tetra Tech expects earnings for first-quarter 2015 in the range of 32–36 cents a share. Revenues, net of subcontractor costs, are estimated in a range from $420 – $470 million.
For fiscal 2015, Tetra Tech expects EPS in the band of $1.55 –$1.75 while revenues, net of subcontractor costs are predicted in a range of $1.75 – $1.95 billion.
Zacks Rank
Currently, Tetra Tech has a Zacks Rank #3 (Hold). Better-ranked stocks that can be considered at the moment include Progressive Waste Solutions Ltd. (BIN), Pernix Group Inc (PRXG) and Heritage-Crystal Clean, Inc. (HCCI). While Progressive Waste Solutions sports a Zacks Rank #1 (Strong Buy), both Pernix Group and Heritage-Crystal Clean carry a Zacks Ranks #2 (Buy).
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