UPDATE: Global Hunter Upgrades Tetra Tech

Global Hunter Securities upgraded Tetra Tech, Inc. TTEK from Accumulate to Buy and raised the price target from $29 to $31.

Analyst Michael Shlisky noted that "TTEK's guidance for EPS in FY:15 is $1.55-$1.75 (vs. $1.44 in FY:14) on revenues of $1.75B-$1.95B (flat at the midpoint), suggesting margin improvement."

"As previously announced, much of the RCM business is being exited, with only the lower volatility and/or higher profit business being retained in the two remaining segments (now renamed WEI and RME)."

Shlisky felt that "management's expectations for the two remaining segments going forward suggest improved margins in 2015 (100-200 bps) at similar revenue levels, despite a lower risk contract portfolio (30 percent fixed price).

"Going forward, WEI is expected to be TTEK's core business, with modest organic growth and 12-13 percent EBITDA margins, while RME is expected to deliver higher organic growth and eventually surpass WEI with equal margins in the coming year.

"This risk-return profile puts TTEK at the upper end of peers. TTEK's new share repurchase program ($200MM over the next two years) is not included in guidance or our estimates and offers additional EPS upside potential," according to Shlisky.

Tetra Tech recently traded at $27.47, up 2.04 percent.