Sunday, November 27, 2022

MDU Resources (MDU) Up on 5-Year Investment Plan Announcement

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MDU Resources Group MDU announced a $3-billion capital expenditure plan for the next five years from 2021 through 2025. This announcement was made on Nov 20 and the company’s shares have gained 4.9% since the release.

Details of the Expenditure

MDU Resources has a two-platform business model, regulated energy delivery platform, as well as construction materials and services platform that includes different operating segments. Expenditures are properly distributed among the two platforms.

In regulated energy delivery, after spending $1,776 million in the 2016-2020 time frame (including $377 million forecast for 2020), the company will invest $2,112 million in the 2021-2025 time frame, up nearly 19% from the previous five-year plan.

In the construction materials and services platform, after spending $961 million in the 2016-2020 time frame (including $244 million forecast for 2020), it will invest $919 million in the 2021-2025 time frame, down 4.4% from the previous five-year plan.

Benefits From Spending

MDU Resources anticipates that the electric and utility will grow its rate base by 5% annually over the next five years on a compound basis. The company’s operations are spread across eight states and its customer base is expected to expand 1.5% annually. These strategic investments will increase the reliability of its services and enable it to serve an increasing customer base effectively.

Investment in pipelines will primarily support organic ventures like the North Bakken Expansion project, which is expected to be in service in late 2021 and increase the existing transportation capacity by 250 million cubic feet per day.

In the construction materials and services platform, the company will focus on organic growth and make opportunistic acquisitions, which will supplement the existing operations and boost earnings.

Price Performance

In the past six months, shares of MDU Resources have gained 17.3%, outperforming the industry’s 3.4% growth.

Zacks Rank & Key Picks

MDU Resources currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include PNM Resources Inc. PNM, Portland General Electric Company (NYSE:) POR and Pinnacle West Capital Corporation (NYSE:) PNW, each currently holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PNM Resources, Portland General Electric and Pinnacle West Capital delivered an average earnings surprise of 9.3%, 98.1%, and 27.1% in the last four quarters, respectively.

The Zacks Consensus Estimate for 2020 earnings for PNM Resources, Portland General Electric, and Pinnacle West Capital has moved up 2.7%, 7.5%, and 5.6%, respectively, in the past 60 days.

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