MDU Resources’ MDU systematic investments should further improve the reliability of services to help better serve the company’s growing customer base. The company’s focus on regulated energy delivery should boost overall performance.
However, this Zacks Rank #3 (Hold) company faces risks related to aging infrastructure and seasonality of business operations.
MDU’s Tailwinds
MDU is focused on safely meeting customer demand by upgrading and expanding its electric and natural gas infrastructure. MDU Resources expects its 2024 earnings from regulated energy delivery businesses in the range of $170-$180 million.
The company continues with its work on several expansion projects, which are expected to add more than 300 million cubic feet per day of incremental capacity upon its completion in 2024, subject to regulatory approvals.
The company expects its capital expenditures to be $2.7 billion in the 2024-2028 period. These investments should increase the reliability of its services and enable it to serve an increasingly large customer base effectively. The company’s compound annual growth rate target for the next five years is in the 6-7% range.
MDU Resources is likely to continue witnessing 1-2% customer growth in the electric and natural gas segments annually through 2026. The construction of Heskett Station Unit IV, the 88-megawatt natural gas-fired combustion turbine in Mandan, ND, has been completed. It came into service in July 2024. This would further increase its customer base.
Headwinds for MDU
A significant portion of the company’s natural gas pipelines and transmission facilities is aging, which may affect operational results. Weathered natural gas pipelines and transmission facilities increase certain risks like breakdown or failure of equipment, pipeline leaks and breakout of fire from the power lines. This may result in unplanned outages, which can hamper the company’s reliability and ability to serve customers.
Some of its operations are highly seasonal, and revenues and certain expenses for such operations may fluctuate significantly during quarterly periods.
MDU’s Stock Price Performance
In the last six months, shares of the company have risen 14.2% compared with the industry’s 13.7% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same industry are National Fuel Gas Company NFG, New Jersey Resources NJR and UGI Corporation UGI. Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for NFG’s fiscal 2024 earnings per share (EPS) has increased 10.1% in the past 90 days to $5.13. It delivered an average earnings surprise of 9.8% in the past four quarters.
The Zacks Consensus Estimate for NJR’s fiscal 2024 EPS indicates an increase of 10.1% from the previous year’s reported number. The Zacks Consensus Estimate for fiscal 2024 sales indicates a year-over-year decrease of 7.9%.
The Zacks Consensus Estimate for UGI’s fiscal 2024 EPS indicates an increase of 3.2% from the previous year’s reported number. It delivered an average earnings surprise of 99.1% in the past four quarters.
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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.
