Tetra Tech Inc. TTEK has failed to impress investors with its recent operational performance due to escalating operating costs and expenses and high debt levels. Also, given the company’s extensive international presence, foreign currency headwind is an added uncertainty.

Headquartered in Pasadena, CA, Tetra Tech is a leading provider of consulting, construction management, engineering, program management and technical services. It serves clients by providing cost-effective and innovative solutions for dealing with the fundamental needs for water, environmental and alternative energy services.

Tetra Tech currently carries a Zacks Rank #4 (Sell). In the past year, the stock has lost 23% compared with the industry’s 22% decline.

Image Source: Zacks Investment Research

Rising Costs: The company has been witnessing the impacts of high operating expenses over time. Its total cost of sales increased 15.5% in the first quarter of fiscal 2025 (ended Dec. 29, 2024) due to rising input costs. Also, its selling, general and administrative expenses increased 5.7% year over year in the fiscal first quarter due to rising marketing costs. Escalating costs pose a threat to the bottom line.

High Debt Level: High debt levels are likely to weigh on TTEK. Tetra Tech’s long-term debt in the last five years (2020-2024) increased 29.7% (CAGR). The company exited first-quarter fiscal 2025 with a long-term debt of $889 million. Its overall current liabilities were $1.3 billion, higher than the cash equivalents of $248.1 million.

Forex Woes: TTEK’s international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar is likely to require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry.

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