Tetra Tech-Why Is Tetra (TTEK) Down 18.8% Since Last Earnings Report?

Core Viewpoint - Tetra Tech's recent earnings report shows strong performance with adjusted earnings and revenues exceeding estimates, but the stock has underperformed the S&P 500, raising questions about future performance leading up to the next earnings release [1][2]. Financial Performance - Tetra Tech reported adjusted earnings of 35 cents per share for Q1 fiscal 2025, surpassing the Zacks Consensus Estimate of 34 cents and management's guidance of 32-34 cents, marking a 25% year-over-year increase [2]. - The company generated revenues of $1.42 billion, reflecting a 16% year-over-year increase, with adjusted net revenues of$ 1.2 billion, up 18% year-over-year, exceeding management's guidance of $1.09-$ 1.15 billion [3]. - The backlog at the end of Q1 was $5.44 billion, up 15% year-over-year [3]. Segment Performance - Revenues from U.S. Federal customers, accounting for 34% of total revenues, increased by 32% year-over-year, driven by a strong project pipeline from USAID [4]. - U.S. State and Local sales rose by 47% year-over-year, supported by advanced water treatment and disaster response services [5]. - International sales increased by 4% year-over-year, bolstered by the U.K. water consulting sector [5]. Cost and Margin Analysis - Subcontractor costs totaled$ 223.3 million, up 4.8% year-over-year, while other adjusted costs of revenues were $975.9 million, up 18.3% [6]. - Adjusted operating income increased by 23.9% year-over-year to$ 137.5 million, with an adjusted margin of 11.5%, up 60 basis points [7]. Balance Sheet and Cash Flow - At the end of Q1, Tetra Tech had cash and cash equivalents of $248.1 million, an increase from$ 232.7 million at the end of Q4 fiscal 2024, while long-term debt rose to $888.4 million from$ 812.6 million [8]. - The company generated net cash of $13.1 million from operating activities, compared to$ 9.2 million in the prior year [9]. Shareholder Returns - Tetra Tech distributed dividends totaling $15.5 million in Q1 fiscal 2025, up from$ 13.9 million in the previous year, and repurchased shares worth $25 million [10]. Fiscal 2025 Outlook - For fiscal 2025, Tetra Tech anticipates net revenues in the range of$ 4.365- $4.765 billion, compared to$ 4.322 billion reported in fiscal 2024, with adjusted earnings projected at $1.37-$ 1.52 per share [11]. - For Q2 fiscal 2025, management estimates net revenues of $1.0-$ 1.1 billion and adjusted earnings of 30-33 cents per share [12]. Estimate Revisions - Estimates for Tetra Tech have trended downward, with a consensus estimate shift of -9.09% over the past month [13]. VGM Scores - Tetra Tech has a Growth Score of B but a Momentum Score of D, with an overall VGM Score of C, indicating a middle-tier position in investment strategy [14].