Tetra Tech Inc. (TTEK) reported first-quarter fiscal 2014 results, with earnings of 41 cents per share exceeding the Zacks Consensus Estimate of 34 cents. However, it came a penny below the prior-year quarter figure of 42 cents. Following the earnings release, shares of the company went down by 1.6% during the regular trading session on Jan 29.
The results were attributable to notable performance of the company’s segments, especially Resource Management & Energy. Also, Tetra Tech registered a rise of 5% in combined backlog (constant currency basis). However, short-term impact of the company’s Remediation and Construction Management segment (‘RCM’) divestiture remained the headwind.
Inside the Headlines
Net revenues dipped 9.5% year over year to $437.1 million and missed the Zacks Consensus Estimate of $455 million. Also, consolidated revenues for the quarter decreased 10% year over year to $581.1 million.
Revenues were affected by Tetra Tech’s decision to divest its RCM division and deliver some fixed-priced constructions.
As per the segments, Water, Environment and Infrastructure segment’s net revenues rose 1.7% year over year to $183.7 million and consolidated revenues increased 1.9% year over year to $233.7 million.
Resource Management and Energy segments net revenues plummeted 9.6% year over year to $242.8 million and consolidated revenues dipped 7.7% year over year to $331.7 million.
Backlog levels remained flat at $1,875 million, on a year-over-year basis.
Liquidity
As of Dec 28, 2014, Tetra Tech’s cash and cash equivalents were $98.9 million, as against $122.4 million as of Sep 28, 2014. Long-term debt stood at $190.1 million, as compared to $192.8 million as of Sep 28, 2014.
The company’s cash from operations stood at $5.5 million, as compared to $13.1 million at the end of Sep 2014.
Dividend & Share Repurchase
In the reported quarter, the company completed its $20 million share repurchase program. Further, Tetra Tech approved additional shares buy back worth $200 million.
On Jan 26, 2015, Tetra Tech declared a quarterly dividend of 7 cents per share. The dividend is payable on Feb 26, to shareholders of record as on Feb 11, 2015.
Outlook
Tetra Tech narrowed its 2015 earnings per share and now projects it in the range of $1.55 to $1.70 (prior one being $1.55 –$1.75). The Zacks Consensus Estimate of $1.65 for the same lies within this new range.
For the second quarter of fiscal 2015, the company expects earnings per share in the range of 28–32 cents a share. The Zacks Consensus Estimate for the same stands at 37 cents.
Our Take
Coming up with another earnings beat in the subsequent quarter, Tetra Tech continues to focus on its operations’ improvement. However, short-term impact of the company’s restructuring initiatives continues to remain a concern for its top and bottom line growth. Nevertheless, we believe, with the actualization of the streamlining procedure of its segments, Tetra Tech will be back on a steady growth track.
Currently, Tetra Tech has a Zacks Rank #3 (Hold). Better-ranked stocks that can be considered at the moment include Pernix Group Inc (PRXG), Advanced Emissions Solutions, Inc. (ADES) and Casella Waste Systems Inc. (CWST). All stocks carry a Zacks Ranks #2 (Buy).
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