Tetra Tech Inc. TTEK is poised to gain from its focus on providing high-end consulting, design and engineering services. Handsome rewards to shareholders add to the stock’s appeal.

Headquartered in Pasadena, 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.

Let’s delve into the factors that make this company a smart investment choice at the moment.

Business Strength: In the quarters ahead, Tetra Tech is poised to gain from its diversified business structure, which helps mitigate the adverse impact of weakness in one end market with strength across the others. Also, the company’s focus on providing high-end consulting, design and engineering services is constantly enhancing its competitive edge. In the fourth quarter of fiscal 2024 (ended September 2024), the company’s revenues increased 9% year over year, driven by increased activity in the U.S. Federal, U.S. State & Local, U.S. Commercial and International client sectors. 

Segmental Strength: Tetra Tech’s Government Services Group (GSG) segment is benefiting from higher international development and advanced water treatment work. Net sales from the segment increased 12% year over year in the fourth quarter of fiscal 2024. Strong project performance in international operations is aiding the Commercial / International Services Group segment. The RPS acquisition is also aiding the segment. Revenues from the segment increased 5% year over year in the fiscal fourth quarter.

Tetra Tech currently carries a Zacks Rank #2 (Buy). In the past year, the stock has gained 20% compared with the industry’s 19.2% growth.

Image Source: Zacks Investment Research

Expansion Efforts: TTEK is focused on strengthening its competency through acquisitions. In May 2024, it acquired Convergence Controls & Engineering, a systems integration and engineering services company. This acquisition will enable it to offer a comprehensive line of integrated automation platform solutions to its clients across the water and energy sectors. Convergence is a part of its GSG segment. Tetra Tech acquired engineering and consulting firm LS Technologies in February 2024. The acquisition of LS Technologies will add significant additional capabilities and clients to its federal IT practice within the GSG segment.

Tetra Tech completed the acquisition of RPS Group plc, an established technology-enabled consultancy firm, in January 2023. The acquisition enhanced its consultancy in water, environment and sustainable infrastructure, thereby expanding its water practice in the United Kingdom and strengthening its foothold in renewable energy and environmental management. 

TTEK also acquired Reston, VA-based enterprise technology services, cybersecurity and management consulting firm Amyx, Inc. in January 2023. As part of the Federal Information Technology division, the Amyx acquisition expanded its use of advanced data analytics, cybersecurity, digital transformation and agile software development solutions for its government and commercial customers. Amyx is integrated into the GSG segment.

Shareholder-Friendly Policies: The company consistently returned significant cash to its shareholders through dividends. In fiscal 2024, Tetra Tech paid out dividends of $58.8 million, up 12.9% year over year. The quarterly dividend rate was hiked 12% in July 2024.