Core Insights - Stantec Inc. (STN) has achieved a 39% year-to-date gain, significantly outperforming the industry's 6% decline, while U.S. peers have shown mixed results [1][8] - The company is benefiting from strong global demand for infrastructure, water security, and climate-resilient solutions, supported by long-term trends such as climate change initiatives and increased infrastructure investments [3][4] Financial Performance - In Q1 2025, Stantec's net revenues grew by 13.3% year-over-year, with organic revenue increasing by 5.9% when excluding acquisitions and currency effects [4] - The U.S. market saw a 2.4% organic growth, while Canada experienced a 15% revenue increase year-over-year, with key contributions from wastewater projects and large industrial developments [5][4] - Globally, revenues rose by 20.3% year-over-year, with the U.K. water business growing over 20% and energy transition projects boosting results in Australia and New Zealand [5] Margin Expansion - Stantec demonstrated efficient growth with project margins improving by 10 basis points to 54.3% and adjusted EBITDA margins rising by 70 basis points to 16.2% in Q1 2025 [9][10] - Lower administrative and marketing expenses, along with a proactive hiring strategy, are expected to enhance workforce utilization and operating leverage in the future [10][11] Analyst Sentiment - There has been a notable increase in positive analyst sentiment, with five analysts raising their 2025 earnings estimates and another five upgrading projections for 2026 [12][16] - Earnings are projected to grow by 19.5% in 2025 and 12% in 2026, with revenue expectations lifted to an 11% increase in 2025 and a 10% gain in 2026 [12][14] Valuation Concerns - Stantec's forward P/E ratio stands at 26.74, above its five-year median of 22.56, raising concerns about its valuation compared to peers like Tetra Tech and AECOM [17] - The elevated valuation may limit upside potential unless the company delivers significant earnings outperformance [17][18]

Core Viewpoint - Tetra Tech (TTEK) has received a Zacks Rank 2 (Buy) upgrade, indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - Rising earnings estimates for Tetra suggest an improvement in the company's underlying business, likely leading to higher stock prices [5]. Recent Earnings Estimate Revisions - For the fiscal year ending September 2025, Tetra is expected to earn $1.47 per share, reflecting a 16.7% increase from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Tetra has increased by 7.3% [8]. Zacks Rank System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [7]. - Tetra's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [10].

Financial Data and Key Metrics Changes - Total revenue for the fourth quarter was $3.2 billion, a decline of 4.2% year-over-year on an organic basis, slightly above expectations [15] - Adjusted EBIT margin was 7.3%, down 110 basis points year-over-year, but slightly above expectations [16] - Non-GAAP EPS was $0.84, down from $0.97 in the fourth quarter of the previous year, driven by lower adjusted EBIT [17] - Full year bookings increased by 7% year-over-year, with a book-to-bill ratio of 1.28 in the second half of the year [21][22] - Non-GAAP diluted EPS for the full year was $3.43, up 11% year-over-year, primarily driven by a lower share count and higher adjusted EBIT [23] Business Line Data and Key Metrics Changes - GBS, representing 51% of total revenue, declined 2.4% year-over-year organically, with a profit margin decrease to 10.9% [17] - GIS, representing 49% of total revenue, declined 6% year-over-year organically, with fourth quarter bookings growing 33% year-over-year [20] - Consulting and Engineering Services (CES) saw bookings up 9% year-over-year, with a book-to-bill ratio of 1.22 [18] Market Data and Key Metrics Changes - The pipeline in consumer industries and retail has dropped, particularly in project-based services, while banking, capital markets, manufacturing, public sector, and insurance remain robust [32][33] - The insurance business grew at mid-single-digit rates through the first three quarters, with confidence in maintaining this growth rate for fiscal 2026 [19] Company Strategy and Development Direction - The company is focused on achieving sustainable profitable revenue growth and reversing eight consecutive years of revenue decline [5] - Investments are being made in sales and marketing to improve capabilities and drive growth [90] - The company plans to restart its share repurchase program, underscoring its commitment to delivering long-term value to shareholders [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future, highlighting the importance of leadership stability and the recruitment of new talent [6][7] - The impact of AI is beginning to accelerate within the client base, with increasing AI spending year-over-year [9] - Fiscal 2026 is expected to be a year of continued disciplined execution to sharpen operations and drive efficiencies despite near-term uncertainties [13] Other Important Information - The company will report financial results under a new segment structure starting in the first quarter of fiscal 2026, which includes Insurance Services and Software, Consulting and Engineering Services, and GIS [28] - Total cash on the balance sheet increased by approximately $570 million year-over-year to $1.8 billion, driven by free cash flow generation and asset sale proceeds [25] Q&A Session Summary Question: Demand and Industry Insights - Management noted good progress in large deals, but some softness in project-based services in consumer industries and retail [32][33] Question: Free Cash Flow Guidance - The $600 million target for free cash flow in fiscal 2026 is based on fiscal 2025 results adjusted for after-tax EBIT guidance and increased restructuring spending [34] Question: Macroeconomic Outlook - The guidance for fiscal 2026 accounts for uncertainty, with a wider range provided for the first quarter to reflect potential conditions [39] Question: Pricing Environment - The pricing environment has been stable, with improvements noted in mega deals and project-based services [40] Question: Gen AI Spending - Gen AI spending has been increasing, primarily in smaller pilot projects, with significant potential for future growth [43][45] Question: Revenue Growth Conditions - Management emphasized the importance of a qualified pipeline and effective execution to achieve revenue growth [52][54] Question: Investment Plans - The company is focusing on replicable capabilities and investing in sales and marketing to drive positive growth [89][90]

Group 1: Earnings Performance - Tetra Tech reported quarterly earnings of $0.33 per share, exceeding the Zacks Consensus Estimate of $0.31 per share, and up from $0.28 per share a year ago, representing an earnings surprise of 6.45% [1] - The company posted revenues of $1.1 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 4.82%, compared to year-ago revenues of $1.05 billion [2] Group 2: Stock Performance and Outlook - Tetra shares have declined approximately 23.3% since the beginning of the year, while the S&P 500 has decreased by 4.7% [3] - The current consensus EPS estimate for the upcoming quarter is $0.34 on revenues of $1.06 billion, and for the current fiscal year, it is $1.37 on revenues of $4.37 billion [7] Group 3: Industry Context - The Pollution Control industry, to which Tetra belongs, is currently ranked in the bottom 18% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment [5]