The contract has a base duration of two years. It is extendable by a maximum of three one- year periods after the completion of the base period. Designing, planning and energy management services are within the purview of the contract.
We expect the U.S. stimulus package to further accelerate sales and profit over the next couple of years. TTEK should exceed expectations in 2010, given the company’s defensive growth profile, strong balance sheet and potential for further upside from stimulus spending and potentially accretive acquisitions.
Federal bodies like The United States Agency for International Development (USAID), the Army Corps of Engineers and the Environmental Protection Agency (EPA) are all receiving significant increases in funding even without stimulus spending. Including stimulus funding, these departments and the Dept. of Defense are responsible for approximately 40.0% of TTEK’s revenue.
Demand for state and local government services is cyclical and vulnerable to economic downturns. If the economy weakens, then the company’s revenues, profits and financial condition may deteriorate. TTEK derives a majority of its revenue from government agencies, and any disruption in government funding or in its relationship with those agencies could adversely affect its business.
A significant shift in U.S. defense spending could harm its operations and significantly reduce future revenues. Moreover, delay in the completion of the budget process for the U.S. government could postpone procurement of its services and have an adverse impact on future revenues.
Tetra Tech Inc. is a leading provider of consulting, engineering, program management, construction and technical services, focusing on resource management and infrastructure. It serves clients by providing cost-effective and innovative solutions to fundamental needs like water, environmental and alternative energy services.
We currently have a Neutral recommendation on TTEK.
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