MDU Resources MDU is poised for growth, courtesy of its two-platform business model, namely regulated energy delivery and construction materials and services operations. Although the company’s operations are exposed to seasonality-related demand risk, this two-platform strategy helps to balance out such fluctuations in demand.
Growth Projections: The Zacks Consensus Estimate for 2019 earnings per share is pegged at $1.51 on $4.84 billion revenues. The bottom and top lines indicate a 9.42% and 6.87% year-over-year increase, respectively.
The consensus mark for 2020 earnings is pegged at $1.62 per share on revenues of $5.03 billion. The bottom line translates to a 6.95% increase and the top line suggests a 3.9% improvement on a year-over-year basis.
Impressive Price Performance: Shares of MDU Resources have gained 9.3% in the past six months versus the industry and S&P 500 Index’s 6.3% and 5.3% growth, respectively.
Price Performance (Six Months)
Zacks Rank and VGM Score: MDU Resources currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Our proprietary VGM Score is based on research that has proven that stocks with the best value, growth and momentum characteristics outperform the market. V stands for Value, G for Growth and M for Momentum. MDU Resources has a VGM Score of B.
Estimate Revisions & Dividend Yield: The Zacks Consensus Estimate for earnings for the current year and 2020 has been revised 1.3% and 1.2% upward, respectively, over the past 60 days. MDU Resources has an expected long-term (three to five years) earnings growth of 7.1%.
The current dividend yield of the company is 2.91%, better than its industry’s average of 2.72%.
Capital projects: The company has outlined capital expenditure plan of $2.74 billion for the period of 2019-2023. MDU Resources will spend 54% of the planned investment in the Electric and Natural Gas utility, 28.7% in construction materials and services, 17.3% in the pipeline and midstream segment, and the rest in the Other category.
These investments will increase the reliability of services and enable the company to effectively serve the increasing customer base. It anticipates the utility electric and natural gas customer base to expand annually by 1-2%.
Rising Backlog: As of Jun 30, 2019, MDU Resources’ construction materials business had a backlog of $1.04 billion, up 42% from $731 million in the corresponding period of 2018. In the second quarter, the construction services business had a backlog of $1.15 billion, up 30% from $888 million in comparable period of 2018. The rising backlog, which is indicative of strong demand for the company’s services and assures a steady flow of revenues, can be attributed to the geographic diversity of construction operations and improving economic conditions in its service territories.
Other Key Picks
Other top-ranked stocks in the utility sector include Alliant Energy Corporation LNT, Chesapeake Utilities Corporation CPK and ONEOK Inc. OKE, each holding a Zacks #2 (Buy).
Alliant Energy, Chesapeake Utilities and ONEOK’s long-term earnings growth is projected at 5.54%, 7% and 11.51%, respectively.
The Zacks Consensus Estimate for Alliant Energy, Chesapeake Utilities and ONEOK for 2019 has moved up 0.4%, 0.3% and 0.9%, respectively, in the past 60 days.
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