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4 Reasons to Add Otter Tail (OTTR) to Your Portfolio Now

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·4 min read
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Otter Tail Corporation OTTR is a smart choice for investment right now, given its two-platform business model that consists of Electric and Manufacturing units. The company is enhancing shareholder value through its high-performing, low-cost electric utility as well as disciplined manufacturing companies.

Focused investment in cleaner sources of energy to produce electricity is expected to reduce carbon emissions from generation units by nearly 50% by 2025 from 2005 levels. The Zacks Consensus Estimate for 2021 and 2022 earnings has moved up 4.1% and 5.4%, respectively.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) stock a strong investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Systematic Investments

Otter Tail makes consistent investments to upgrade and maintain the existing infrastructure for providing 24x7 reliable services to the customer base. The company has plans to invest $762 million in the 2021-2025 time period in electric, manufacturing and plastics segments.

Nearly 21.4% of the planned expenditure for the electric segment will be utilized for clean energy resource additions to its portfolio, and another 21% will be utilized for adding and upgrading transmission and distribution lines. The ongoing investments and planned future spending will assist the company to make its systems clean and services affordable as well as reliable, along with develop innovative programs to assist customers.

Growth Projections & Surprise History

The Zacks Consensus Estimate for 2021 earnings per share and revenues is pegged at $2.55 and $915.6 million, respectively. The bottom- and top-line estimates suggest an increase of 8.9% and 2.9%, respectively, from the year-ago level.

The Zacks Consensus Estimate for 2022 earnings and revenues is pegged at $2.72 per share and $959 million, respectively. The bottom- and top-line estimates suggest a 6.9% and 4.7% increase, respectively, from the year-ago level.

Otter Tail’s trailing four-quarter earnings surprise is 16.8%, on average.

Return on Equity & Dividend Yield

Return on Equity (ROE) indicates how efficiently a company is utilizing shareholders’ funds to generate returns. At present, its ROE is 11.88%, higher than the industry average of 9.41%.

Currently, the company has a dividend yield of 3.26% compared with the industry’s 3.22%.

Debt Position

Its total debt to capital ratio is 41.29 compared with the industry average of 51.64. This indicates that the company is managing the business far more efficiently than peers in the same space.

Its times interest earned ratio at the end of first-quarter 2021 was 4.4, unchanged sequentially. The strong ratio indicates that the company will be able to meet debt obligations in the near future without any difficulties.

Price Performance

In the past three months, the stock has gained 13.8% compared with the industry’s rally of 10.8%.

Other Stocks to Consider

Other top-ranked stocks in the same space include CMS Energy Corporation CMS, NewJersey Resources Corporation NJR and UGI Corporation UGI, each currently holding a Zacks Rank #2.

CMS Energy, NewJersey Resources and UGI Corp. delivered an average earnings surprise of 6.5%, 7.1% and 8%, respectively.

The Zacks Consensus Estimate for 2021 earnings for CMS Energy has moved up 1% in the past 60 days. In the same time frame, the Zacks Consensus Estimate for fiscal 2021 earnings for NewJersey Resources and UGI Corp. has moved up 16.8% and 3.4%, respectively.

+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities

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CMS Energy Corporation (CMS) : Free Stock Analysis Report

Otter Tail Corporation (OTTR) : Free Stock Analysis Report

UGI Corporation (UGI) : Free Stock Analysis Report

NewJersey Resources Corporation (NJR) : Free Stock Analysis Report

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Zacks Investment Research