Reasons to Add Otter Tail (OTTR) to Your Portfolio Right Now
Otter Tail Corporation OTTR provides attractive investment opportunities in the utility space, given its two-platform business model, consisting of Electric and Manufacturing units. OTTR is enhancing shareholder value through its high-performing, low-cost electric utility and disciplined manufacturing companies.
Let’s focus on the factors that make the Zacks Rank #1 (Strong Buy) stock a strong investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Growth Projections & Surprise History
The Zacks Consensus Estimate for 2022 and 2023 earnings per share is pegged at $7.08 and $4.27, respectively. Earnings estimates for 2022 and 2023 have moved up 31.8% and 12.1%, respectively, in the past 60 days.
The Zacks Consensus Estimate for 2022 revenues is pegged at $1.56 billion, suggesting an increase of 30% from the year-ago reported figure.
Otter Tail’s trailing four-quarter earnings surprise is 31.4%, on average.
Investments & Emission Reduction
OTTR makes consistent investments to upgrade and maintain the existing infrastructure to provide 24x7 reliable services to its customer base. The company plans to invest $978 million between 2022 and 2026 in the electric, manufacturing and plastics segments.
Nearly 46% of the planned expenditure will be utilized for adding renewable and natural gas sources to Otter Tail’s portfolio, while 31% will be used for adding, as well as enhancing electric transmission and distribution lines. The ongoing investments and planned capital expenditure will assist OTTR in making its systems clean and providing affordable and reliable services to its customers.
Focused investment in cleaner sources of energy to produce electricity is expected to reduce carbon emissions from generation units by 50% by 2025 from the 2005 levels. Otter Tail aims to lower emissions from generation units by 97% by 2050 from the 2005 levels.
Return on Equity & Dividend Yield
Return on Equity (ROE) indicates how efficiently a company is utilizing its shareholders’ funds to generate returns. At present, Otter Tail’s ROE is 25.6%, higher than the industry average of 10.4%.
Currently, OTTR has a dividend yield of 2.2% compared with the Zacks S&P 500 composite’s 1.69%.
Debt Position
Otter Tail’s total debt-to-total capital ratio is 42.5 compared with the industry average of 54. This indicates that OTTR is managing the business far more efficiently than its peers.
Its times interest earned ratio at the end of second-quarter 2022 was 9.9, up 330 basis points from the 2021-end level. The strong ratio is indicative of Otter Tail’s ability to meet its debt obligations in the near future without any difficulties.
Price Performance
In the past 12 months, Otter Tail’s shares have gained 35.6% compared with the industry’s growth of 6.5%.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks in the same sector are NextEra Energy NEE, The Southern Company SO and Alliant Energy LNT, each currently carrying a Zacks Rank #2 (Buy).
NextEra Energy, Southern Company and Alliant Energy delivered earnings surprises of 5.5%, 9.4% and 5.8%, respectively, in the trailing four quarters on average.
The Zacks Consensus Estimate for 2022 earnings for NextEra Energy, Southern Company and Alliant Energy has moved 1.8%, 1.9% and 1.8%, respectively, from the year-earlier reported numbers.
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NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
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