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MDU Resources (MDU) Gains From Investments & Liquidity Status

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MDU Resources Group, Inc.’s MDU two-platform business model, planned buyouts, capital investments in the electric and natural gas utility and an improving backlog are helping the utility enhance its existing operations. Also, the company boasts enough liquidity to meet its near-term obligations.

We recently issued an updated research report on this currently Zacks Rank #3 (Hold) company. The utility’s long-term (three to five years) earnings growth rate is pegged at 6.63%.

What’s Boosting the Stock?

MDU Resources’ two-platform business structure comprising the regulated energy delivery arm and the construction materials and services unit includes different operating segments. This strategy aids in alleviating the industry-related seasonality risks that adversely impact demand.

After spending $648 million in 2020, the utility spent $107.2 million in the first quarter of 2021. However, it reduced its investment plans to $810.5 million from $826 million in the ongoing year. It expects to invest $3,032 million during the 2021-2025 period. These investments will increase the reliability of its services and enable it to serve the growing customer base more efficiently.

At March-quarter end, construction materials had a backlog of $819 million while that of the construction services business was $1.27 billion. Further, the construction materials business acquired Mt. Hood Rock to expand aggregates operation in Portland.

As of Mar 31, 2021, the utility had cash and cash equivalents worth $55.1 million and an available borrowing capacity of $695.5 million under its outstanding credit facilities. This shows that the company currently has ample liquidity to meet its near-term debt obligations.

Woes

However, the company’s electric and natural gas transmission, and distribution businesses are governed by the federal, state and local administrative agencies. Also, changes in strict regulations or additional rules could increase its overall expenses depending on the extent of its investments. Moreover, an aging infrastructure and stiff competition remain concerns.

Price Performance

In the past year, shares of the company have gained 36%, outperforming the industry's rise of 3.8%.

One Year Price Performance

Zacks Investment Research
Zacks Investment Research

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Stocks to Consider

A few better-ranked utilities are NewJersey Resources Corporation NJR, Hawaiian Electric Industries, Inc. HE and UGI Corporation UGI, all carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NewJersey Resources’ long-term (three to five years) earnings growth rate is pegged at 7.1%. The Zacks Consensus Estimate for fiscal 2021 earnings has been revised 16.8% upward in the past 60 days.

The Zacks Consensus Estimate for Hawaiian Electric Industries’ 2021 earnings has been revised 8.8% upward in the past 60 days. The company’s long-term earnings growth rate is pegged at 7.1%.

UGI Corporation’s long-term earnings growth rate stands at 8%. The company delivered a trailing four-quarter earnings surprise of 58.23%, on average.

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Hawaiian Electric Industries, Inc. (HE) : Free Stock Analysis Report

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