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MDU Resources' Strong Backlog to Boost Long-Term Growth

Zacks Equity Research

MDU Resources Group MDU announced that the Construction businesses segment ended first 11 months of 2018 with a growing backlog. As of Nov 30, the segment posted a backlog of $1.6 billion, up 45.45% year over year.

The backlog includes $929 million from the Construction services segment and $681 million from the Construction materials segment.

Acquisition Strategy

The increase in backlog can be attributed to rise in construction projects based on customer demand. Moreover, the company makes strategic acquisitions to expand operations.

To expand operations in the construction materials, its subsidiary Knife River Corporation, completed five deals in 2018. In April 2018, the company acquired Teevin & Fischer. In June, it acquired Little Falls, MN-based Tri-City Paving. In July, the company acquired the operations of Molalla Redi-Mix and Rock Products, Inc. In October, MDU Resources announced the acquisition of Sweetman Const. Co.

Long-Term Investment Plans

MDU Resources projects capital expenditure of $2.6 billion for the period of 2019-2023. The company will spend 27.5% of the projected amount on the construction materials and services segment. These investments are likely to boost the Construction material business and will increase reliability of services. This will enable the company to serve increasing customer base, effectively. Notably, the company anticipates the customer base to expand 1-2% annually.

Price Performance

In the past 12 months, the company’s shares have lost 5.2% compared with the industry’s gain of 4.0%.

 


 

Zacks Rank & Key Picks

MDU Resources currently has a Zacks Rank #4 (Sell).

A few better-ranked stocks from the same industry are Southwest Gas Corp SWX, Sempra Energy SRE and ONE Gas, Inc OGS. All three stocks carry a Zacks Rank #2 (Buy). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Southwest Gas reported an average positive earnings surprise of 31.31% in the last four quarters. Its expected EPS growth for the next 3-5 years is pegged at 4.0%

Sempra Energy reported an average positive earnings surprise of 4.97% in the past four quarters. Its expected EPS growth for the next 3-5 years is pegged at 8.10%

ONE Gas reported an average positive earnings surprise of 11.36% in the last four quarters. Its expected EPS growth for the next 3-5 years is pegged at 5.71%

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