Tetra Tech Lifts Outlook as Earnings Rebound
Backlog reached $4.49 billion after rising more than $200 million during the quarter.
Tetra Tech Inc. (TTEK), the engineering and consulting company, reported a sequential recovery in third-quarter profit as its commercial and international operations outpaced government services.
The quarter marked an acceleration from the first half of the fiscal year. EBITDA rose 18% from the second quarter to $173 million, after holding near $147 million in the first quarter, while the EBITDA margin expanded to about 15.6% of net revenue from 13.9% in the preceding period.
Revenue increased 7% sequentially to $1.309 billion, though it fell 4% from a year earlier. Net revenue followed the same pattern, rising 6% from the second quarter to $1.109 billion while remaining 4% below the prior-year period. Excluding USAID, the State Department and episodic disaster-response work, net revenue grew 8% from a year earlier.
Operating income rebounded 20% sequentially to $158 million but remained 4% below the year-earlier result. Earnings rose to $0.42 a share from $0.36 in the second quarter and slipped from $0.43 a share a year earlier.
Commercial and international work drove the improvement. Net revenue in that group grew 7% sequentially and 9% from a year earlier to $634.2 million. Government Services Group net revenue increased 3% from the second quarter to $474.3 million but was 17% below the prior-year quarter.
Cash generation also strengthened, with quarterly operating cash flow climbing to $229 million from $165 million in the second quarter and $72 million in the first. Through nine months, operating cash flow rose 31% from a year earlier to $466.6 million. Days sales outstanding improved to 56 days from 58 days in the preceding quarter, though it remained above the year-earlier level.
Tetra Tech now expects fiscal 2026 adjusted earnings of $1.56 to $1.59 a share, raising the midpoint by 10 cents from its initial outlook. The company narrowed its net-revenue forecast to $4.315 billion to $4.365 billion, whose midpoint stands $190 million above the initial fiscal-year projection.
The company accelerated third-quarter share repurchases to $100 million from $50 million in each of the preceding three quarters. It also raised its quarterly dividend to $0.072 a share, an 11% increase from a year earlier, pairing higher shareholder returns with a second consecutive quarterly increase in backlog.