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MDU Resources Group, Inc. (MDU) announced that it has acquired Little Falls, MN-based Tri-City Paving, Inc. to further expand its construction materials business. The company is working on its strategy to expand the operation of the construction materials subsidiary, Knife River Corporation.
In April 2018, the company acquired Teevin & Fischer, which also became part of Knife River Corporation. Both acquisitions are likely to fuel growth of the construction materials business and be accretive to MDU Resources’ earnings in 2018.
Increased Focus on Construction Materials & Services
Per a report from Oldcastle Business Intelligence, construction in the Midwest states is expected to expand 4% in 2018. Hence, MDU Resources’ decision to strengthen its Construction Materials & Services is quite logical and well thought out.
In the first quarter of 2018, the Construction Materials business contributed 17.8% to the total revenues of the company. The back-to-back acquisitions will further boost the earnings and revenues from the Construction material business.
Backlog in Construction Materials
The construction materials backlog as of Mar 31, 2018, was $691.9 million, up from $486 million reported on Dec 31, 2017. A significant portion of the backlog will be completed by the end of this year, boosting the revenues of the company.
What Lies Ahead?
The company aims to increase its profitability through organic growth and strategic acquisitions. MDU Resources remains optimistic about the overall economic growth, and infrastructure spending from the state and local authorities, driving demand for construction materials and services.
Before the acquisition of Tri-City Paving, the company provided 2018 revenue guidance in the range of $1.8-$1.9 billion for the Construction Materials business. We expect the company to revise the same upward in due course.
In the past six months, the company has returned 1.6%, marginally lower than its industry’s growth of 2.0%.
Zacks Rank & Key Picks
MDU Resources currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same industry are UGI Corporation UGI, Chesapeake Utilities Corporation CPK and Northwest Natural Gas Company NWN. UGI sports a Zacks Rank #1 (Strong Buy), while both Chesapeake Utilities and Northwest Natural Gas carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
UGI reported a positive earnings surprise of 11.92% in the first quarter of 2018. Its 2018 earnings estimate has moved up 4.6% to $2.70 in the past 60 days.
Chesapeake Utilities reported a positive earnings surprise of 4.48% in first-quarter 2018. Its 2018 earnings estimate has moved up 1.2% to $3.48 in the past 60 days.
Northwest Natural Gas reported a positive earnings surprise of 2.86% in the first quarter of 2018. Its 2018 earnings estimate has moved up 0.5% to $2.22 in the past 60 days.
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