This engineering and consulting business has just agreed to acquire the$209 million Professional Services business segment of Willbros Group (WG) for $130 million in an all-cash transaction, expected to close during the second quarter of TRC’s fiscal 2016. The transaction is forecast to be accretive to earnings during fiscal 2017.
TRC Companies (TRR)
from The Periscope Report
TRC Companies (TRR) is a unique engineering and consulting company, specializing in the clean-up of hazardous and non-hazardous waste, and the decommissioning of large power plants. The company is working on the decommissioning of a big power plant in New York City, whereby TRR is responsible for making sure no decontaminants get in the East River. It has also established itself as a leader in the energy field, especially the midstream market for oil and gas companies, becoming one of the top providers of licensing services for large energy projects.
There is no analyst coverage on TRR. Our sales estimate for the 4Q was $107 million, and our earnings estimate was $0.18 per share. TRR blew away both forecasts. For the 4Q ended June 2015, revenue increased 21% YoY to $114.6 million, after increasing 15% YoY in the prior quarter. Revenues were up 14% sequentially. Note the acceleration in growth.
Gross profit increased 42% YoY to $24.5 million, after increasing 120% YoY in the prior quarter. Gross profit was up 40% sequentially. The GPM increased 310 basis points YoY to 21.4%, up from 18.3% a year ago, and up from 17.3% in the prior quarter.
Net Income increased 34% to $6.8 million, after increasing 360% YoY in the prior quarter. Net Income was up 30% sequentially. The NPM improved 60 basis points YoY to 5.9%, up from 5.3% a year ago, and up from 5.1% in the prior quarter. Net earnings increased to $0.22 per share, up from $0.17 per share a year ago, and up from $0.17 per share in the prior quarter. TRR beat our estimate by four cents.
Organic growth accounted for 79% of the overall sales growth in 4Q, the rest came from acquisitions. The total company backlog grew 23% YoY to $317 million, compared to the company’s market cap of $369 million.
In spite of the volatility and downward trajectory of the price of oil, TRR continues to see tremendous opportunities in the oil and gas markets specific to midstream. Between the move towards cleaner energy, basically no coal and less oil, natural gas continues to be a strategic growth energy source. Conversion of coal generating plants or new generating plants, eventual exportation of oil, and the upgrading of old pipes, all lead to expanded opportunities even as the slowdown of global oil production occurs.
Microgrids are where TRR’s energy efficiency services intersect with power delivery and transmission distribution services. TRR is at the forefront of a number of pilot programs establishing microgrids across many different systems and sources. These programs will provide more reliable electricity especially in times of crisis. Additionally, as flexible renewable technologies are accepted, they create a much greener form of electricity.
TRR made three acquisitions in fiscal 2015, and management is looking at more deals for 2016. The company is planning to expand into adjacent markets, either regionally or technically, and into water and security.
The Board has a $10 million three year stock repurchase program in place, but TRR did not buyback any stock in the 4Q.
TRR had a fantastic quarter and management gave a very bright outlook for the next year. Considering the company has a growing backlog, expanding margins, strong Cash Flows, no debt, and has plenty of Cash for acquisitions, we recommend aggressive purchase of this underfollowed company.
Tom Byrne, The Periscope Report, 4025 Sunset Ridge Drive, Canyon Ferry Crossing, Helena, MT 59602, 406-465-4663, September, 2015