Tetra Tech's Segue Buyout To Aid Government Services Unit

Tetra Tech, Inc. (NASDAQ:TTEK) announced yesterday that it acquired Arlington, VA-based Segue Technologies, Inc. Financial terms of the transaction have been kept under wraps.

Segue specializes in providing management consultancy, IT solutions and cybersecurity to customers, including commercial, non-profit and government. The firm’s government clients include the U.S. Air Force, the U.S. Navy and the U.S. Marine Corps. It employs more than 200 people.

Details of Buyout

Per Tetra Tech, the buyout of Segue will strengthen its ability to better serve customers with innovative techniques — including enterprise-wide software applications, advanced data analytics and cloud services. In addition, the buyout is predicted to solidify Tetra Tech’s business from the government, especially the U.S. Department of Defense, and commercial customers.

The company will integrate Segue with its Government Services Group. The segment, which engages in serving the U.S. government clients (federal, state and local) and development agencies, generated 53.7% of adjusted net revenues in the first quarter of fiscal 2020 (ended December 2019).

Buyout Strategies

The above-mentioned transaction is consistent with Tetra Tech’s policy of acquiring businesses to improve product lines and market exposure.

Tetra Tech acquired eGlobalTech in April 2019. Since then, the buyout has been benefiting Tetra Tech’s business from commercial and government customers. Notably, eGlobalTech launched Auxilium — an AI solution — in July 2019. Tetra Tech also acquired shares of WYG plc in July. The buyout is helping improve Tetra Tech’s business in water, environment and infrastructure markets as well as in the U.K. and Europe.

Zacks Rank, Price Performance and Earnings Estimates

With a market capitalization of $5.2 billion, the company currently carries a Zacks Rank #2 (Buy). The company anticipates gaining from rise in environmental and infrastructure programs, strengthening disaster recovery and municipal water infrastructure businesses, demand for sustainable buildings and environmental services, and growth in the U.S. Federal budget.

It predicts adjusted earnings of $3.40-$3.55 per share for fiscal 2020 (ending September 2020), up from $3.35-$3.55 mentioned previously.

In the past three months, Tetra Tech’s shares have gained 2.8% versus the industry’s decline of 4.2%.

Also, the Zacks Consensus Estimate for earnings per share is pegged at $3.51 for fiscal 2020 and $3.80 for fiscal 2021 (ending September 2021), marking growth of 1.4% and 2.2% from the respective 30-day-ago figures.

Tetra Tech, Inc. Price and Consensus