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Nobody's gonna read this because the ticker is $TTEK and it sounds like a bluetooth speaker, but earnings is tonight and I already bought calls so I need to manifest this into existence.
Tetra Tech. Water and environmental engineering, extremely boring, I know. I only found them because a friend does water stuff for a county and he mentioned that every data center trying to get built near him has to pay some outside firm to figure out the water situation before the town will approve it — cooling water, water rights, convincing people the aquifer isn't going to get drained. Turns out it's these guys or basically one competitor that do that at scale. And there is a lot of data centers getting built right now, obviously. That's the entire reason I started looking, I wasn't sitting around dreaming about environmental consulting stocks.
So then I actually skimmed the last earnings call, which I know is out of character for this sub, and I noticed the backlog. It had been shrinking for like a year straight and last quarter it jumped back up to 4.2-something billion, up 8% in one quarter. For a consulting company the backlog basically IS next year's revenue, so it turning back up is the real signal, and the stock did approximately nothing. On top of that they raised their full year guidance. I don't care what business you're in, companies that are quietly dying do not raise guidance two weeks before the whole market is watching.
Here's why it's even cheap in the first place. Earlier this year they had a chunk of USAID / State Department revenue get cut when all that got wound down, and the market took one look at "government money going away" and dumped the thing from 43 down to like 27. It's around 31 now. But that USAID stuff was never the good part of the business, and everyone got so busy panic selling the scary headline that they ignored the water and defense side quietly growing underneath it. It trades around 19x forward earnings. People in here pay 40x for companies that lose money and light guidance on fire, and this thing is 19x and growing with margins going UP
The contracts have been absolutely nonstop. They just got selected to design the largest dedicated PFAS treatment facility in the entire country, up in Dayton. If you don't know what PFAS is, it's the "forever chemicals" thing, and the EPA is now forcing basically every water system in America to deal with it. That regulation is not getting un-passed, it's a 20 year money faucet, and Tetra Tech is THE name utilities call for it. That contract alone kind of made the case for me. Then on top of it there's a $400M Army Corps of Engineers award, a $100M Air Force environmental one, an FAA task order just last week. This is not a company waiting for work, work is falling on their head.
And the AI angle isn't me huffing spray paint, I want to be clear. Management said the data center water demand out loud on the earnings call as a growth driver. It's early and it's not the biggest piece of the business yet, but it's real and it's pointed straight up, because every one of these hyperscale data centers is a permitting and water-supply nightmare and somebody gets paid a fortune to untangle it. This is the closest thing to a pick-and-shovel AI play that isn't already priced at the moon.
So stack it up: data center water demand, PFAS regulation forcing decades of cleanup, defense spending, the backlog already turning back up, guidance already raised, cash flow at records, and it's sitting at 19x because people are still crying about USAID from six months ago. That is a re-rate sitting there waiting for a reason, and the reason is earnings in about six hours.
The play is simple. They beat almost every single quarter. A beat plus people finally connecting the water/AI dots gets it back near 40, and a normal re-rate from there puts 45 by December, which isn't even a reach considering the stock was up near 40 earlier this year. It just needs a reason to remember.
Positions: December 45 calls and some shares at 29 average.