Premier consulting and engineering services firm, Tetra Tech TTEK clinched a $25-million single-award contract from the U.S. Agency for International Development (USAID) to provide monitoring and evaluation services in Mozambique. Per the five-year contract, the company will offer training, research and evaluations, performance monitoring, data verification, and environmental compliance in the region.
Currently, USAID/Mozambique is running a program to provide innovative water utility and infrastructure programs in sub-Saharan Africa. However, infrastructure limitations and a dispersed population often act as formidable headwinds, restricting oversight and management. Tetra Tech’s data quality assessments as well as its ability to enhance functionality of web-based monitoring and evaluation systems are expected to overcome these challenges.
Tetra Tech has managed to secure multiple government contracts in the past few years, which has significantly supplemented its top line. During first-quarter fiscal 2017, total backlog from ongoing operations – which is the best indicator of future revenue streams – reached a record high of $2.5 billion, a remarkable jump of 37% year over year, driven by solid orders in the federal, and state and local markets.
For fiscal 2017, Tetra Tech remains bullish about its growth across all four client sectors – U.S. federal, U.S. state and local, the U.S. commercial work and finally international. The company’s U.S. state and local clients – in both the municipal water and smart water services domains – are likely to be its strongest growth drivers for the upcoming quarters.
In addition, Tetra Tech’s shares have had a solid run in recent times, owing to its impressive top-line growth, restructuring efforts and accretive acquisitions. Over the past six months, the company's shares recorded an impressive average return of 11.6%, outperforming the Zacks categorized Pollution Control Equipment & Services industry average return of 8.3%.
Going forward, we believe that Trump’s surprise victory has opened a floodgate of opportunities for Tetra Tech. The broad-based bipartisan support for infrastructure investment in the U.S., which can range from $500 billion up to $1 trillion, can prove extremely beneficial for the company. With $200 billion passed in programs since the Nov 2016 election in the U.S., the company’s future looks promising.
The new administration has already begun to identify potential priority projects across quite a broad range of infrastructure services, including water infrastructure. We believe such positive industry trends to bode well for this Zacks Rank #2 (Buy) company.