We recently published a list of 10 Best Engineering Stocks to Buy for 2025. In this article, we are going to take a look at where Tetra Tech, Inc. (NASDAQ:TTEK) stands against other engineering stocks to buy for 2025.
Overview of the Engineering Industry
The engineering industry is playing an increasingly significant role in today’s tech-supported world. The demand for engineering solutions is increasing globally, and this trend is expected to continue into 2025. Investments in clean energy, urban development, and transportation are driving this demand, presenting a scalable opportunity for investors to benefit from engineering companies’ potential.
According to a report by Mordor Intelligence, the global engineering services industry has remained resilient over the years, with a market size worth $1.67 trillion as of 2024. It is expected to grow to $2.04 trillion by 2029 at a compound annual growth rate (CAGR) of 4.20% between 2024 and 2029. Although the largest market for the engineering services industry is centered in the Asia Pacific region, the Middle East and Africa are showing the fastest market growth globally.
This growth is attributed to various factors, including infrastructure development, technological advancements, demand for sustainable solutions, and the need for specialized skills in infrastructure programs. Since infrastructure projects are complicated and strenuous, the demand for innovative engineering services continues to grow. In fact, data from the US Census Bureau shows that the value of infrastructure building in the US rose from $1.80 trillion to $1.84 trillion between October 2022 and February 2023. The surge in the use of digital technologies such as artificial intelligence, cloud computing, and IoT is another primary force driving the market.
Thus, the engineering sector stands out as a promising investment opportunity due to technological advancements, resilience to economic fluctuations, supportive government initiatives, and strong market demand.
The construction industry experienced a 10% increase in nominal value added and a 12% growth in gross output in 2024. According to Deloitte, construction spending surpassed $2 trillion in the US in 2024. Its employment level touched 8.3 million in July 2024, exceeding its previous high of 7.7 million in 2006. These numbers have been consistently increasing for more than a year. Similarly, the Dodge Momentum Index (DMI), which measures nonresidential building spending, was on an upward trajectory in fiscal Q2 2024. This reflects increasing confidence in market conditions among developers and owners.
Deloitte’s 2025 Engineering and Construction Industry Outlook states that there are reasons to be optimistic in 2025. The company’s analysis of the Oxford Economic Model shows that short-term interest rates are likely to fall gradually over the coming years, followed by interest rate cuts by the Federal Reserve. The improving financial and economic conditions are anticipated to positively influence construction and engineering demand across various segments.
Declining mortgage rates may also increase demand and residential construction activity. Other drivers of growth in segments such as manufacturing, engineering, and energy may include government investments through the Infrastructure Investment and Jobs Act (IIJA), the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, and the Inflation Reduction Act (IRA).
Our Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of 30 engineering stocks. We then selected the 10 stocks that were the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An energy executive observing a wind turbine farm from a remote location.
Tetra Tech, Inc. (NASDAQ:TTEK)
Number of Hedge Fund Holders: 39
Tetra Tech, Inc. (NASDAQ:TTEK) is a global engineering and consulting service provider focusing on environment, water, and sustainable infrastructure. It operates through the Government Services Group (GSG) and Commercial/International Services Group (CIG) segments. 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.
The company’s revenue increased by 15% to $4.32 billion for the fiscal year 2024. In addition, its annual operating income exceeded $0.5 billion for fiscal 2024 for the first time in its history. This reflects its record performance throughout the year, and in fiscal Q4 2024. Revenue for fiscal Q4 2024 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, Inc.’s (NASDAQ:TTEK) 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, Inc. (NASDAQ:TTEK) 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 PFAS (per-and poly-fluoroalkyl substances are a large group of man-made chemicals used in various industrial and consumer products since the 1950s), water scarcity, and changing environmental conditions, we believe the demand backdrop for Tetra Tech is improving, creating an attractive investment opportunity”.
Overall, TTEK 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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Disclosure: None. This article is originally published at Insider Monkey.