Tetra Tech, Inc. TTEK reported better-than-expected results for third-quarter fiscal 2018 (ended June 2018).
Earnings/Revenues
Quarterly adjusted earnings came in at 71 cents per share, up 34% year over year. The bottom line also outpaced the Zacks Consensus Estimate of 65 cents.
Revenues in the fiscal third quarter came in at $570.4 million, up 14.4% year over year. The top line also surpassed the Zacks Consensus Estimate of $541 million.
Segmental Break-Up
Revenues of the Government Services Group in the reported quarter came in at $301 million, up 13.1% year over year.
The Commercial / International Services Group revenues came in at $267.8 million, up 15.7% year over year.
Tetra Tech, Inc. Price, Consensus and EPS Surprise
Tetra Tech, Inc. Price, Consensus and EPS Surprise | Tetra Tech, Inc. Quote
Costs/Margins
Subcontractor costs in the quarter under review were $194.4 million, up from $187.1 million recorded in the year-ago period. Cost of revenues in the fiscal third quarter were $460.8 million, up 12.9% year over year. Gross profit margin in the quarter was 14.3%, up 110 basis points year over year.
Selling, general and administrative expenses during the quarter were $53.9 million, up from $44.4 million recorded in the year-ago quarter. Meanwhile, interest expenses in the June-end quarter flared up 55.5% year over year to $4.3 million. Operating margin in the fiscal third quarter was 7.3%, up 60 bps year over year.
Balance Sheet/Cash Flow
Exiting the fiscal third quarter, Tetra Tech had cash and cash equivalents of $214 million, up from $190 million recorded as of Oct 1, 2017. Long-term debt came in at $419 million, up from $341.3 million reported at the end of fiscal 2017.
In the nine-month period ended fiscal 2018, the company generated $67.4 million cash from operating activities, down from $71.6 million recorded in the comparable period last year. Capital expenditures totaled $6.3 million, down 9.6% year over year.
Outlook
Tetra Tech is poised to boost its near-term revenues and profitability on the back of continued growth in demand across all end-markets. The company currently anticipates reporting revenues of $550-$575 million and earnings of 70-75 cents per share in fourth-quarter fiscal 2018.
Additionally, Tetra Tech has raised its earnings view for fiscal 2018 from $2.50-$2.62 per share to $2.59-$2.64 per share. Also, net revenue guidance for the fiscal is currently pegged at $2.20-$2.22 billion, instead of the prior projection of $2.15-$2.25 billion.
Zacks Rank and Key Picks
Tetra Tech currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the Zacks Industrial Products sector are listed below:
Altra Industrial Motion Corp. AIMC currently sports a Zacks Rank of 1 (Strong Buy). The company pulled off an average positive earnings surprise of 4.01% over the last four quarters. You can see the complete list of today’s Zacks Rank #1 Rank stocks here.
Chart Industries, Inc. GTLS also flaunts a Zacks Rank of 1. The company recorded an average positive earnings surprise of 29.36% over the trailing four quarters.
Barnes Group, Inc. B holds a Zacks Rank #2 (Buy). The company came up with an average positive earnings surprise of 6.88% during the same time frame.
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