Tetra Tech To Gain From Rising Federal Government Contracts

Tetra Tech Inc. TTEK is gaining from improving commercial and government end markets and receiving some noteworthy contracts from the federal government. In the last reported quarter, the company got orders from the U.S. EPA, the Navy and Department of Energy and the U.S. Agency for International Development (USAID). Also, earlier this month, Tetra Tech received an Indefinite Delivery-Indefinite Quantity (“IDIQ”) contract from USAID.

Additionally, the company is planning to acquire firms to expand its oil and gas production in North America, which will significantly broaden its presence in the oil and gas industry in the future. Moreover, Tetra Tech expects revenues to increase modestly in 2014, driven by increased organic and acquisitive investments.

Also, Tetra Tech is focused on streamlining its business portfolio by exiting the fixed price construction businesses and reaping the dry powder to fund the strategic mergers and acquisitions in the future. The company's plan to exit from its RCM segment is noteworthy in this respect.

Last month, Tetra Tech 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.

Although the company's plan to exit its RCM segment holds good for the long term, the related expenses may drag down its near-term results. Tetra Tech's fourth quarter revenues dipped 11% on a year-over-year basis due to the company's decision to exit the RCM segment. Also, Tetra Tech's business is prone to be affected by the negative impact of currency translation as the company derives a sizeable portion of its revenues from international businesses.

To gain deeper insight into Tetra Tech, you can refer to our updated research report, which was issued on Dec 11, 2014.

Over the last 30 days, the Zacks Consensus Estimate for 2014 earnings per share dipped by 2 cents to $1.66. Nevertheless, for 2015, it rose by a penny to $1.91. The stock currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked stocks in the same industry include Perma-Fix Environmental Services Inc. PESI, Progressive Waste Solutions Ltd. BIN and CECO Environmental Corp. CECE. While Perma-Fix and Progressive Waste Solutions carry a Zacks Rank #1 (Strong Buy), CECO Environmental sports a Zacks Rank #2 (Buy).