Tetra Tech Inc. (TTEK) has won a $40 million contract for the management of a U.S. government forestry program in Indonesia. The program will last for four years.
Tetra Tech Inc. has won a $119 million contract from the U.S. government to assist the local government in Kabul for the improvement of sanitation, streets and parks. The contract has a base duration of one year with two one-year extension options.
We expect the U.S. stimulus package to drive accelerating sales and profit growth over the next couple of years. Tetra Tech should exceed expectations in 2010, given its defensive growth profile, strong balance sheet and potential for a 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 taking stimulus spending into account.
Including stimulus funding, these departments and the Dept. of Defense are responsible for approximately 40.0% of Tetra Tech’s revenue. In the most recent quarter, 18% of quarterly revenues were sourced from U.S. state and local bodies. Moreover, Tetra Tech is set to experience a 25% funding increase in the current year.
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. Tetra Tech derives a majority of its revenue from government agencies. 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 reduce future revenues. Moreover, a delay in the completion of the budget process for the U.S. government could postpone procurement of its services adversely impacting 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 provides cost-effective and innovative solutions to serve fundamental needs for water, environmental and alternative energy services.
It typically begins at the earliest stage of a project by applying science to problems and developing solutions tailored to clients’ needs and resources. Its solutions may span the entire life cycle of the project and include applied science, research and technology, engineering, design, construction management, construction, operations and maintenance, and information technology. Shaw Group Inc. (SHAW) is a major competitor.
We currently have a Neutral recommendation on Tetra Tech Inc.
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