Why Tetra Tech (TTEK) Is the Best Engineering Stock to Buy for 2025

Ever since Deloitte's 2025 Engineering and Construction Industry Outlook highlighted reasons to be optimistic in 2025, a big question has loomed over the potential growth opportunities in the engineering sector: Which stocks should investors consider? The answer: Tetra Tech (TTEK), write our analysts. But that choice could lead to significant returns. Here's why:

Tetra Tech, Inc. (NASDAQ:TTEK) is a global engineering and consulting service provider focusing on environment, water, and sustainable infrastructure. It operates through two segments, Government Services Group (GSG) and Commercial/International Services Group (CIG). The company provides engineering and consulting services to US commercial clients and international clients through the CIG segment. In addition, it provides engineering and consulting services primarily to US government clients and international development agencies across the globe through the GSG segment.

Tetra Tech's revenue increased by 15% to $4.32 billion for the fiscal year 2024, and its annual operating income exceeded $0.5 billion for the first time in its history. This reflects its record performance throughout the year, and in fiscal Q4 2024, revenue increased by 9% from last year to $1.37 billion. This 9% increase came atop a very strong quarter performance in fiscal Q4 2023.

Tetra Tech's work with US Federal clients is increasing and was up 16% in fiscal Q4 2024 compared to last year. Excluding the contributions of Ukraine, the company's margins with the US Federal government increased by around 13%, supported by increases in its civilian and defense environmental and infrastructure programs. In addition, Tetra Tech grew its state and local revenue by 9%, driven by its operations in advanced water treatment and water system modernization for cities and municipalities across the US. These trends position the company as one of the best engineering stocks to buy for 2025.

Polen Global SMID Company Growth stated the following regarding Tetra Tech, Inc. (NASDAQ:TTEK) in its Q3 2024 investor letter:

"We initiated a new position in Tetra Tech, Inc. (NASDAQ:TTEK), an environmental consulting business we’ve followed in our library for several years. Tetra Tech is focused on water and water infrastructure-related consulting and is a significant player in environmental, renewable energy, sustainable infrastructure, and international development. The company has a long history of consistent growth and solid returns on capital. About 30% of the revenue comes from long-term projects from the federal government, another 11% from state and local, and a portion from disaster response and international aid. This provides some ballast to the company’s demand, also driven by commercial projects. Between significant infrastructure spending, the potential for widespread PFAS cleanup, water scarcity, and changing environmental conditions, we believe the demand backdrop for Tetra Tech is improving, creating an attractive investment opportunity".

Tetra Tech ranks 5th on our list of engineering stocks to buy for 2025. While we acknowledge the potential of engineering stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TTEK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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