Tetra Tech Downgraded to Strong Sell - Analyst Blog

On Jun 25, Zacks Investment Research downgraded Tetra Tech Inc. (TTEK) to a Zacks Rank #5 (Strong Sell). Tetra Tech is a technical service provider for water and environmental purifications, pollution control and other related fields. 

Why the Downgrade?

On Jun 18, Tetra Tech lowered its financial guidance for the third quarter of fiscal 2013, which resulted in a downward revision in earnings estimate in the last 7 days. The Zacks Consensus Estimate for 2013 has gone down by a whopping 44.85% over the last 30 days to 91 from the earlier estimate of $1.65, while for 2014, the estimate decreased by 8.37% to $1.86.

According to the company, the lowered guidance to a loss of 30 cents to 50 cents per share from an earlier guidance of 32 cents to 42 cents earnings per share brought about the impacts of increased restructuring costs from weakness in Eastern Canada and mining. However, this necessitated investigation into possible breaches of fiduciary duty by the company. Different law offices have got engaged in this investigation. With this a number of lawsuits have been filed in the United States District Court against the company and Shareholders Alert has been declared. This had a further adverse effect on the stock.

The company delivered negative earnings surprises in three out of the last four quarters with an average negative surprise of 1.59% for the last four quarters. Also, the company's earnings estimate for the current quarter is a loss of 41 cents per share. Shares of Tetra Tech also attained a 52-week low on Jun 19 of $22.56. Moreover, most of the analysts have downgraded their estimates during the last 30 days and thus the stock experienced a sharp dip in its Zacks Rank straight from a Zacks Rank #3(Hold) to a Zacks Rank #5(Strong Sell).

Other Stocks to Consider

Not all stocks in the retail sector are performing as disappointingly as Tetra Tech. Other stocks worth considering in the sector are CECO Environmental Corp. (CECE) and NSK Ltd. (NPSKY) with a Zacks Rank #1 (Strong Buy), while Versar Inc. (VSR) currently holds a Zacks Rank #2 (Buy)