Tetra Tech (TTEK) Q4 2026 earnings review
Tetra Tech's order book rises 13%, but sales growth eases
Tetra Tech, a water and environmental engineer, won plenty of new work, but its sales growth slowed. Its order book rose by $533 million over the year. Underlying sales, which leave out disaster relief and State Department aid, grew 5%, after 8% earlier in the year. Total sales met the plan only because Ukraine aid work beat the finance chief's estimate.
| Sales after subcontractor costs | $1.15B −1% from a year ago |
|---|---|
| Order book | $4.67B +13% from a year ago |
| Profit per share, excluding one-offs | $0.49 +9% from a year ago |
| Fiscal 2027 sales outlook | New: $4.425–4.625B middle of the range: 4% growth |
⚖️ Verdict: ⚪ Neutral
The story is unchanged, because a stronger order book and weaker underlying growth pull in opposite directions. Profit margins widened faster than planned, and NASA and Navy awards filled the order book. One caution: the new 2027 plan calls for about 4% growth without saying how much aid work it includes.
The question now is what the 2027 plan assumes for Ukraine aid work. If that work ends, the rest of the business must grow about 11% by our math; if it continues, about 2% is enough. The State Department figure in first-quarter results will settle it.
🐂 Bull Case
Signed Work Rose 13% Over the Year
Backlog is the value of work that clients have signed but Tetra Tech has not yet billed. It shrank through fiscal 2025 after USAID, the US aid agency, cancelled projects. Chief executive Roger Argus said new client programmes "drove our backlog up by more than $530 million" over the year.
The fourth quarter alone added $180 million, by our math, after a $140 million drop in the same quarter a year earlier. NASA chose the engineering firm for a $1.4 billion logistics agreement, and the US Navy and the Environmental Protection Agency added awards. Defense and UK water work both rose.
- Order book: $4.67 billion, up 13% from a year ago
- New work signed for each dollar billed: $1.14
- Change from last quarter: up 4%, a third rise in a row
This matters because most signed work turns into sales within a year, so the rebuild supports growth in fiscal 2027. But NASA shares the logistics agreement among several firms, so Tetra Tech earns money from it only when the agency places orders.
What to watch: the order book in the first-quarter results early next year. A fourth straight rise would show that the new agreements are turning into a steady flow of orders.
Profit Margin Widened More Than the Company Planned
Tetra Tech tracks EBITDA, earnings before interest, tax, depreciation and amortization, excluding one-offs, as a share of sales after subcontractor costs. Finance chief Steve Burdick planned a 0.7-point gain for fiscal 2026. The firm delivered 0.9 points, lifting the margin to 15.2%.
Lower project costs explain the gain. Through nine months, the cost of delivering projects other than subcontractors fell 1.3 percentage points as a share of sales, by our math, while overhead rose 0.6 points. That fits the exit from low-margin USAID work. The release gives no fourth-quarter cost lines.
What to watch: the first-quarter margin early next year. Burdick said in the summer that about half a point a year was right for fiscal 2027, so a gain near that size would mean the boost from leaving USAID work has ended.
Cash Flow Funded $371 Million of Returns
Tetra Tech turns most of its profit into cash. Finance chief Steve Burdick said the balance sheet lets it "continue to invest in organic growth and strategic acquisitions". Operating cash flow rose 14% in fiscal 2026, to $523 million.
- Paid to shareholders: $371 million in dividends and buybacks
- Buyback authority left: $798 million, after a new $500 million approval by our math
- Quarterly dividend: up 11% from a year ago
The fiscal 2027 plan assumes about 2% fewer shares, so buybacks lift profit per share. But fourth-quarter operating cash fell to about $56 million by our math, from $101 million a year earlier, and the release does not explain why.
What to watch: operating cash in the first-quarter results. A return to last year's pace would show the weak fourth quarter as a matter of timing in client payments.
🐻 Bear Case
Underlying Sales Growth Slowed to 5%
"We completed fiscal year 2026 with a strong fourth quarter driven by our global commercial and government businesses," chief executive Roger Argus said. Underlying sales leave out disaster relief and the aid projects Tetra Tech ran for USAID and the State Department. They grew 5% in the quarter, after 8% in each earlier quarter of the year.
The slowdown sat in CIG, the commercial and international division, where sales rose 3% against 9% in the third quarter. International clients, the largest customer group, also added only 3%. The engineering firm moved some work between its two divisions this quarter, so the comparison is not exact.
This cuts against Argus's account, because the biggest customer group barely grew. Total sales also landed just 0.7% above the middle of the company's own range, the narrowest gap this year.
What to watch: international sales growth in the first-quarter results early next year. A second quarter near this pace would show that the slowdown is lasting rather than a gap in timing.
State Department Work Rose to $94 Million
Tetra Tech still runs aid projects for the State Department, including work in Ukraine. Finance chief Steve Burdick said in the summer that fourth-quarter revenue from it would probably stay near the third quarter's $66 million. It came to $94 million.
The extra work mattered because total sales landed inside the outlook range only with its help. By our math, that range left room for underlying growth of about 7% at the middle, and the rest of the business delivered 5%. Aid work made up about 8% of fourth-quarter sales.
What to watch: the State Department figure in the first-quarter results. The fiscal 2027 plan does not say how much of this work it assumes, so a sharp drop would leave the rest of the business to carry more of the growth.
Risks this quarter didn't answer
Six standing concerns got little or no new evidence from the release and slides. Each line below gives what this quarter showed and the reading that would move it.
- AI and billable hours: the release and slides say nothing on whether AI tools cut the hours clients pay for; chief executive Roger Argus's next call comments will show.
- Federal orders: federal sales rose 9% excluding disaster work, but the outlook slide flags a "Federal government transition"; first-quarter federal growth settles it.
- State and local funding: sales to these clients rose 6%, but pre-disaster planning work fell and the slide flags "State & local government transitions".
- US commercial: sales rose 6% after 1% in the third quarter, helped by power transmission; a second quarter like this would ease the concern.
- Large acquisitions: no deal came, and the outlook "Excludes contributions from future acquisitions"; a deal announcement would test it.
- Convertible notes due 2028: no update in the release; the annual report will show the terms.
👓 Other Themes
Digital Automation Grew, Without a Revenue Figure
Digital automation, Tetra Tech's work modernising and securing the control systems of water and industrial plants, grew again, the company said. LA Metro hired the firm for a $14 million digital systems contract. The engineering group still publishes no revenue for this business, and the slides do not repeat the $500 million target for 2030 that it set in 2025.
UK and Canadian Spending Plans Support Demand
The slides point to public spending behind international demand. They put the UK water investment programme, known as AMP8, at £105 billion, and say Canadian infrastructure investment will rise 97% by 2027/28. Both programmes feed Tetra Tech's largest customer group. Yet international growth slowed this quarter, so the spending has not yet lifted results.
💲 Other KPIs
Both divisions kept more of each sales dollar as operating profit than in the third quarter. The government division, GSG, reached 18.8%, against 17.5%. The commercial and international division, CIG, improved as well, to 16.2%. A year ago GSG earned 22.9% on disaster work, but the recast of the divisions makes that comparison loose.
Borrowing edged up against yearly profit after two acquisitions and a year of buybacks. Net debt stood at 1.0 times EBITDA, a measure of operating profit, against 0.9 times a year ago. That sits at the bottom of the firm's target range, so the balance sheet still has room for deals.
🔮 Guidance
New. The plan has sales after subcontractor costs rising about 4% in fiscal 2027, after a 6% fall in 2026. By our math, the first-quarter range then leaves about 5% growth for the rest of the year. The loss of USAID work no longer weighs on the comparison, but the outlook does not say how much State Department work it includes.
New. The forecast has first-quarter sales up about 2% from a year ago, the first rise in five quarters. The year-ago quarter held $51 million of aid work, against $94 million in the latest one. So the size of the rise depends on how much of that work continues.
New. The outlook puts profit per share about 8% below the year-ago $0.40. That quarter included one-off gains from a business sale and a lower estimate of payments owed for past acquisitions. Excluding those, it earned $0.35, so the outlook points to about 6% growth by our math.
New. The middle of the range sits about 8% above fiscal 2026 profit per share excluding one-offs. Against the reported $1.69, the rise is about 2%. By our math, after the first quarter the plan leaves about 5% growth for the rest of the year. The slides assume 255 million average shares and leave out future acquisitions.
❓ Key Questions
How much State Department work does the 2027 plan assume?
Aid work for the State Department reached $94 million in the fourth quarter, well above the finance chief's estimate. Without the split, readers cannot tell how much growth the rest of the business must deliver.
Why did international sales grow only 3%?
International clients are the largest customer group, and their sales rose 12% in the third quarter. The slides list UK water and Canadian infrastructure as rising, so the cause of the slowdown needs explaining.
How much of the order book is multi-year funding?
The order book rose $533 million over the year. Work funded over several years turns into sales more slowly than near-term orders, so the split decides how much the rebuild adds to fiscal 2027 sales.
How much growth came from Halvik and Providence?
Tetra Tech bought these two defense consulting firms during fiscal 2026. The release reports underlying growth without removing their sales, so the growth of the existing business on its own is unknown.
What is digital automation revenue, and does the 2030 target stand?
The company set a $500 million revenue target for digital automation by 2030 in 2025. It has published neither the business's revenue nor the target since, though the slides still list the work as a strength.