Are MDU and Seagate Technology Growth & Income Investments?

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This week I discuss, MDU Resources Group (MDU), and Seagate Technology (STX) both of whom recently reported earnings where they beat top and bottom line expectations.

MDU Resources GroupMDU provides value-added natural resource products and related services that are essential to energy and transportation infrastructure, including regulated businesses, an exploration and production company and construction companies. MDU Resources includes regulated electric and natural gas utilities and regulated natural gas pipelines and energy services, natural gas and oil production, construction materials and contracting, and construction services.

MDU is not just a Utility company as more than half of their profits come from its construction segment. But the Utility side is doing very well as the electric and natural gas segment earned +17.8% more than the year ago quarter as the company sold more electric and gas during the quarter while increasing its customer base (+2%). Further, the company is expecting to purchase a wind farm in southwestern North Dakota in late 2018, further expanding its production and customer base. On the natural gas side, management expects its new 21 mile natural gas pipeline to be completed this year to attract new customers.

The construction segment, which consists of two divisions, construction services, and construction materials, both saw strong revenues and earnings in its most recent reported quarter. The continued economic growth in the U.S. has been one of the big drivers behind the construction segments success. The segments performs infrastructure work for other utility companies, builds powerlines, electric substations, and underground natural gas pipelines. Moreover, the President's recent announcement of his 10 year trillion dollar infrastructure plan is viewed as a big positive going forward for MDU Resources. But even before this infrastructure boom hits, the company's construction services segment posted record revenues in 2017, $1.37 billion, and saw earnings grow by +57.2%. The record year was attributed to higher workloads, specialty contracting work in high-tech manufacturing and retail areas, and equipment sales and rentals. The construction materials business saw earnings grow by +20.2% in 2017 due to increased total projects, and the entrance into new markets. Lastly, both segments saw significant increases in their backlog of projects.

Due to the strong backlogs of projects, and management guiding FY 2018 EPS in the high range of the previous consensus earnings which caused analyst estimates to improve from $$1.29 to $1.38. Further, the company had recently increased its quarterly dividend payment by +2.6% for an annual dividend yield of +2.9%.

Seagate TechnologySTX offers a portfolio of hard disc drives, solid state drives and solid state hybrid drives. It offers a range of disk drive products for the enterprise, client compute and client non-compute market applications. The Company also provides data storage services for businesses, including online backup, data protection and recovery solutions.

The company recently reported earnings where they beat the Zacks consensus earnings and revenue estimates for the second consecutive quarter. The company saw both earnings and revenues increase year over year, +7.2%, and +0.7% respectively. The big driver behind the recent beats has been the growth in the cloud segment. In the earnings report, management commented that they expect demand for drive capacity and applications to remain strong through 2018.

The company has also made two large investments recently; a $1.25 billion investment in Toshiba Memory, and another in Ripple. The Toshiba move is expected to drive NAND revenue, and help gain more of a market share in the hard disk drive segment. The Ripple move is an investment in the company's underlying blockchain use cases, and distributed ledger. This is expected to help Seagate's data storage, and data generation areas.

During the earnings report, management also guided next quarter's revenue estimates above expectations, and revealed that their free cash flow levels were the strongest since Q1 13. This news caused analyst's earnings estimates to increase for the next two quarters, and next two fiscal years as you can see in the table below.

To add to this positive news, the company also pays a large +4.91% annual dividend yield.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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