(TTEK) Tetra Tech and Science Applications International Joint Venture Wins Contract

A joint venture of Tetra Tech Inc. (TTEK) and Science Applications International Corporation (SAI), called Integrated Justice Systems International, LLC (IJSI) has received a contract to provide worldwide civilian police and criminal justice assistance to the U.S. Department of State’s Bureau of International Narcotics and Law Enforcement Affairs (INL).

For this multiple-award, indefinite delivery/indefinite quantity (IDIQ) contract ceiling is $10 billion. The contract is for a period of one year and has an option to be extended four times by one year.

The joint venture has expertise for successful international criminal justice training and worldwide logistics. The Department of State is working to strengthen criminal justice systems in select partner countries. Integrated Justice Systems International through its Technical assistance, training, logistics and infrastructure services will facilitate the Department of State in achieving its target.

We expect the U.S. stimulus package to drive accelerating sales and profit growth over the next couple of years. The company’s results are supported by its defensive growth profile, strong balance sheet, and the potential for further upside from stimulus spending and potential accretive acquisitions. Tetra Tech has executed well, despite Federal funding headwinds and state and local budget constraints.

However, demand for state and local government services is cyclical and vulnerable to economic downturns. Besides, if the economy weakens, its revenues, profits and financial condition may deteriorate. The company derives a majority of its revenue from government agencies, and any disruption in government funding or in its relationship with those agencies could adversely affect its business.

Headquartered in Pasadena, California, Tetra Tech Inc. was initially founded in 1966 as a provider of engineering services related to waterways, harbors and coastal areas. Over the past 40 years, the company has substantially increased the size and scope of its business and expanded its service offerings through a series of strategic acquisitions and internal growth. Tetra Tech at present provides environmental services, water/wastewater management, infrastructure services, security design, and outsourced technical services.  The company currently operates 250 offices worldwide and employs about 10,000 people. Major competitors of Tetra Tech are Arcadis NV, Shaw Group Inc. (SHAW) and URS Corporation (URS).

We currently maintain our Neutral rating on Tetra Tech, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

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