Why Tetra Tech Stock Popped Today

Shares of engineering company Tetra Tech (NASDAQ: TTEK) jumped 11% through 9:45 a.m. ET Thursday after the company beat on both the top and bottom lines last night.

Heading into the company's fiscal fourth-quarter earnings report, analysts forecast Tetra Tech would earn $0.40 per share on sales of less than $1.1 billion in the period ended Sept. 28. In fact, Tetra Tech earned $0.44 per share on a non-GAAP (adjusted) basis, and sales surpassed $1.2 billion.

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Tetra Tech Q4 earnings

Q4 revenue rose 6% year over year, leading to increases of 26% on operating profit and 37% on net profit per diluted share. As calculated according to generally accepted accounting principles (GAAP), Tetra Tech actually earned $0.48 per share -- better than its non-GAAP number.

CEO Dan Batrack said the company set new records for quarterly revenue and operating profit, and also expanded its operating profit margin. Demand for "consulting services in resilient water management and digital water automation" drove the results.

For the full year, Tetra Tech grew sales 9% and earned $0.93 per share.

Is Tetra Tech stock a buy?

Turning to new fiscal-year guidance, Tetra Tech predicts it will generate net revenue between $4.05 billion and $4.25 billion, and earn between $1.40 and $1.55 per share. That's at least 50% growth over fiscal 2025, and on only a 5% to 11% increase in revenue, confirming that the gains in operating profit margin are sticking.

Suppose Tetra Tech can maintain that rate of growth (hint: It probably cannot; most analysts forecast only 15% earnings growth between fiscal 2026 and 2027). This would easily justify the stock's implied forward P/E ratio of 26 or less. Even just one year of strong earnings growth, however, will probably suffice to make Tetra Tech stock at least a short-term winner.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.