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MDU Resources' (MDU) Investments & Liquidity Status Bode Well

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Zacks Equity Research
·3 min read
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MDU Resources Group, Inc.’s MDU two-platform business model, strategic acquisitions, capital investments in the electric and natural gas utility plus improving backlog are its key tailwinds. 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 company’s long-term (three to five years) earnings growth rate is pegged at 5.63%.

What’s Boosting the Stock?

MDU Resources’ two-platform business model comprising the regulated energy delivery platform and the construction materials and services platform includes different operating segments. This strategy helps balancing out the industry-related seasonality risks that adversely impact demand.

The company spent $648 million in 2020, up from the 2019 reading of $636 million. It anticipates investing $826 million in 2021 and $3,048 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.

As of Dec 31, 2020, construction materials had a backlog of $673 million while that of the construction services business was $1.27 billion. Further, the construction material business continues to acquire operations for expanding the company’s aggregate reserves and its market coverage across the West United States.

Moreover, total liquidity of MDU Resources at the end of 2020 was worth $718.7 million, which will be sufficient 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 the introduction of 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 43.7%, outperforming the industry's rise of 23.8%.

Stocks to Consider

A few better-ranked utilities are Black Hills Corporation BKH, CMS Energy Corporation CMS and Korea Electric Power Corporation KEP, 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.

Black Hills’s long-term (three to five years) earnings growth rate is pegged at 5.21%. It delivered an earnings surprise of 3.57%, on average, in the trailing four quarters.

CMS Energy delivered an earnings surprise of 8.91%, on average, in the trailing four quarters. The company’s long-term earnings growth rate is pegged at 6.95%.

Korea Electric Power’s long-term earnings growth rate is pegged at 5%. The Zacks Consensus Estimate for 2021 earnings has been revised 2.95% upward in the past 60 days.

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CMS Energy Corporation (CMS) : Free Stock Analysis Report

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Black Hills Corporation (BKH) : Free Stock Analysis Report

MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report

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