MDU Resources Group Inc. reported its fourth-quarter 2024 earnings, revealing a shortfall compared to analyst expectations. The company posted earnings per share (EPS) of $0.34, falling short of the forecasted $0.3006. Revenue also missed the mark, coming in at $535.5 million against an anticipated $789.62 million. Following the announcement, MDU’s stock price fell by 6.09% in pre-market trading. According to InvestingPro data, MDU maintains strong fundamentals with a "GREAT" financial health score of 3.09 out of 4, suggesting resilience despite the revenue miss.
Key Takeaways
- MDU Resources’ EPS of $0.34 surpassed the forecast of $0.3006.
- Revenue of $535.5 million significantly missed the forecast of $789.62 million.
- Stock price dropped by 6.09% in pre-market trading.
- The company completed a significant spin-off of Everest Construction Group.
- MDU anticipates $3.1 billion in capital investment over the next five years.
Company Performance
MDU Resources reported a transformative year in 2024, with GAAP earnings reaching $281.1 million or $1.37 per share. Income from continuing operations was $181.1 million, or $0.88 per share, while adjusted income from continuing operations increased by 22% year-over-year to $184.4 million, or $0.90 per share. The Electric Utility segment saw earnings rise to $74.8 million, while the Pipeline segment achieved record earnings of $68 million. InvestingPro analysis reveals the company trades at an attractive P/E ratio of 8.7x, with additional insights available in the comprehensive Pro Research Report, covering what matters most about MDU’s financial performance.
Financial Highlights
- Revenue: $535.5 million, missing the forecast of $789.62 million.
- Earnings per share: $0.34, exceeding the forecast of $0.3006.
- Full-year GAAP earnings: $281.1 million or $1.37 per share.
- Income from continuing operations: $181.1 million or $0.88 per share.
Earnings vs. Forecast
MDU Resources reported EPS of $0.34, surpassing the forecast of $0.3006, resulting in a surprise percentage of approximately 13.1%. However, revenue fell short by 32.2%, with actual figures at $535.5 million compared to the $789.62 million forecast.
Market Reaction
Following the earnings release, MDU Resources’ stock price declined by 6.09% in pre-market trading. The stock’s performance was influenced by the revenue miss, despite beating EPS expectations. Despite recent volatility, InvestingPro data shows MDU has delivered an impressive 70.58% return over the past year, with a current market capitalization of $3.44 billion. The company also maintains a strong tradition of shareholder returns, having maintained dividend payments for 54 consecutive years. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels.
Outlook & Guidance
MDU Resources has set its 2025 EPS guidance between $0.88 and $0.98 per share. The company plans a $3.1 billion capital investment over the next five years, with a long-term EPS growth target of 6-8%. MDU has no equity issuance planned for 2025, though potential issuance is anticipated in 2026. The company’s strong liquidity position is evidenced by a healthy current ratio of 1.15, indicating sufficient resources to meet short-term obligations while pursuing growth initiatives.
Executive Commentary
Nicole Covisto, CEO of MDU Resources, described 2024 as "truly a transformational year" for the company. She emphasized the achievement of becoming a "pure play regulated energy delivery business" and expressed optimism for the future.
Risks and Challenges
- Revenue shortfall: The significant miss in revenue could impact investor confidence and future growth prospects.
- Regulatory challenges: Ongoing regulatory actions in states like Wyoming and North Dakota may pose operational risks.
- Market volatility: Fluctuating market conditions could affect MDU’s stock performance and strategic initiatives.
Q&A
During the earnings call, analysts inquired about the potential Bakken East pipeline project and the timeline for future equity issuance. MDU clarified that no equity issuance is planned for 2025, with potential plans in 2026. The company also explained the drivers behind its 2025 guidance and the factors influencing its range.
Full transcript - Mdu Res Group Inc (NYSE:MDU) Q4 2024:
Constantine, Conference Facilitator: Hello. My name is Constantine and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group year end twenty twenty four earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer period.
The webcast can be accessed at www.mdu.com under the Investor Settings, select Events and Presentations and click Year End twenty twenty four Events Earnings Conference Call. After the conclusion of the webcast, a replay will be available at the same location. I would now like to turn the conference over to Jason Volmer, Chief Financial Officer of MDU Resources Group. Thank you, Mr. Volmer.
You may now begin your conference.
Jason Volmer, Chief Financial Officer, MDU Resources Group: Thank you, operator. Welcome everyone to our year end twenty twenty four earnings conference call. You can find our earnings release and supplemental materials for this call on our website at www.mdu.com under the Investors tab. Leading the discussion today with me is Nicole Covisto, President and CEO of MDU Resources. Also with us today to answer questions following our prepared remarks are Rob Johnson, President of WBI Energy and Garrett Singer, our Chief Utilities Officer.
During the call, we will make certain forward looking statements within the meaning of the federal securities laws. For more information about the risks and uncertainties that could cause our actual results to vary from any forward looking statements, please refer to our most recent SEC filings. We may also refer to certain non GAAP information. For the definition and a reconciliation of any non GAAP information to the appropriate GAAP metric, please reference our earnings release. With the completion of the Everest Construction Group spin off occurring October 31, we reported results of Everest as discontinued operations, and our prior period results have been restated to reflect the completion of both the Everest and Knife River spin offs.
I I will provide consolidated financial results later during the call, which will reflect this change. But first, I want to turn the call over to Nicole for her remarks. Nicole?
Nicole Covisto, President and CEO, MDU Resources Group: Thank you, Jason, and thank you, everyone, for spending time with us today and for your continued interest in MDU Resources. Twenty twenty four was truly a transformational year for our company, during which we celebrated our one hundredth anniversary, completed the spin off of Everest Construction Group and also provided tremendous value to our stockholders. I am extremely proud of our team. We have reached our stated goal of becoming a pure play regulated energy delivery business and believe we have positioned MDU Resources for continued growth and future success. Underpinning all of this is the continued strong performance of our business.
Our adjusted earnings per share from continuing operations increased 22% year over year to $0.9 per share. Our pipeline segment again achieved record earnings in 2024, a 45% increase year over year, driven by record transportation volumes and increased storage revenue. Our Electric segment also experienced earnings growth in 2024, driven largely by rate relief. These achievements underscore our unwavering commitment to delivering safe and reliable service and sustainable growth with our dedicated employees playing a pivotable role in our continued success. We believe our business remains poised for compelling long term growth prospects.
At our Utility, our combined retail customer base grew by 1.4%, which reinforces our company’s need to proactively manage our utility infrastructure to meet the demands of our growing customer base. We also saw 6.8% rate base growth in 2024. We continue to see data center opportunities, including the four five hundred and eighty megawatts of data center load we have under signed electric service agreements. Of that total, 180 megawatts is currently online with the balance starting to come online in 2025 and expected to continue through the next few years. Our current approach is to serve these large customer opportunities with a capital light business model, which not only benefits our earnings and returns but also provides cost savings to our retail customers.
On the regulatory front, we remain very active with several ongoing actions, including a natural gas rate case filed in Wyoming on October 31, where we are requesting an annual increase of $2,600,000 or 14%. On November 7, the North Dakota Public Service Commission approved our natural gas rate case settlement with final rates effective December 1. On December 11, a multiparty settlement agreement was filed in our Washington multiyear natural gas case with rates proposed to be effective 03/01/2025 and 03/01/2026. On January 14, the Montana Public Service Commission approved our interim rate increase request after reconsideration with interim rates effective February 1 and subject to refund as we finalize the general rate case outcome. Our focus remains on delivering safe and reliable electric and natural gas services to our expanding customer base with active efforts to seek regulatory recovery for our investments.
As mentioned at our Pipeline segment, we achieved record earnings and record transportation volumes for the third consecutive year. This segment is executing well on our core strategy and delivering solid results driven by strategic expansion, increased demand for transportation and storage services and continued benefit from new transportation and storage services rates that were effective August one of twenty twenty three. We remain committed to investing in future expansion projects to meet increasing customer demand for services, including strong interest from industrial customers and power generation projects like the recently signed agreement to serve a new electric generation facility being developed in Northwest North Dakota. We are targeting an in service date of late twenty twenty eight to begin serving gas to that facility. On November 1, we closed on the purchase of a 28 mile natural gas pipeline lateral in Northwestern (NASDAQ:NWE) North Dakota.
The lateral extends our pipeline system to a natural gas processing plant in the Bakken. Our Wahpeton expansion project in Eastern North Dakota, which provides approximately 20,000,000 cubic feet of natural gas transportation capacity per day, was placed in service on December 1. We also held a nonbinding open season for a potential Bakken East pipeline project, which could consist of three seventy five miles of pipeline construction from Western North Dakota to Eastern North Dakota. This open season concluded on January 31, and we are currently evaluating those results. We are initiating 2025 earnings per share guidance in the range of $0.88 to $0.98 per share.
This range reflects continued strong performance across our segments coming off a very strong performance in 2024 as previously stated, while also accounting for the absence of nonrecurring items we experienced in 2024 in dis synergies from the Everest spin off, which together total approximately $0.04 per share of impact when comparing 2024 to 2025 guidance. As we look ahead, we are focused on our core strategy with a commitment to customers and communities, operational excellence, returns focused initiatives and an employee driven culture. We believe we are also well positioned for growth into the future with an anticipated capital investment of $3,100,000,000 over the next five years, seven percent to 8% utility rate base growth and customer growth in the 1% to 2% annually. We also anticipate long term EPS growth of 6% to 8%, rebasing that number off of 2025 to reflect our new pure play regulated structure, while targeting a 60% to 70% annual dividend payout ratio. We are looking forward with great optimism.
The prospects for continued customer and system growth in our electric and natural gas utilities and the strong performance of our pipeline with consistent demand for pipeline services are all promising as we move into 2025. As always, MD Resources is committed to operating with integrity and with a focus on safety. We remain dedicated to creating superior shareholder value as we continue providing essential products and services to our customers while being a great and safe place to work. I will now turn the call back over to Jason for the financial update. Jason?
Jason Volmer, Chief Financial Officer, MDU Resources Group: Thank you, Nicole. I’m excited to share our results for 2024. This morning, we announced full year earnings of $281,100,000 or $1.37 per share on a GAAP basis compared to 2023 GAAP earnings of $414,700,000 dollars or $2.03 per share. It’s important to note that certain costs associated with the spin offs of both Knife River in May of twenty twenty three and Everest in October of twenty twenty four are reported as discontinued operations in our GAAP based results. 2024 income from continuing operations was $181,100,000 or $0.88 per share compared to $330,100,000 or $1.62 per share in 2023.
As a reminder, we experienced a gain on the retained shares of Knife River in 2023 of $186,600,000 net of tax, which was reported in continuing operations in 2023. Provide financial results that more closely correlate with and better outline the strength of our ongoing business operations, we’re also reporting adjusted income from continuing operations. For more information on the adjustments, please see the first table in our earnings release. Adjusted income from continuing operations for 2024 was $184,400,000 or $0.9 per share, a 22% increase when compared to the 2023 adjusted income from continuing operations of $150,800,000 or $0.74 per share. As we turn to our individual segments, our electric utility reported earnings of $74,800,000 compared to $71,600,000 in 2023.
The increase was largely the result of higher retail sales revenue from rate relief in North Dakota, South Dakota and Montana. Lower volumes from the majority of customers larger due to cooler weather in the second quarter of twenty twenty four and higher operation and maintenance expense partially offset the increase. Total (EPA:TTEF) earnings impact from data center loads in 2024 was approximately $3,000,000 Our Natural Gas reported earnings of Natural Gas business reported earnings of $46,900,000 compared to $48,500,000 in 2023. The decrease was largely due to higher operation and maintenance expense and higher depreciation and amortization expense, primarily due to increased asset additions. These decreases were partially offset by higher retail sales revenue due to rate relief in North Dakota and South Dakota.
The pipeline segment posted a third consecutive year of record earnings totaling $68,000,000 in 2024, which compares to $46,900,000 last year. The earnings increase was driven by record transportation volumes, primarily from growth projects placed in service in November of twenty twenty three and throughout 2024. Higher storage related revenue and a full year of new transportation and storage rates which were effective in August of twenty twenty three further drove that increase. The business also benefited from proceeds received in a customer settlement that was recorded in other income as well as a decrease in the company’s effective state income tax rate. The increase was offset in part by higher operation and maintenance expense and higher depreciation and amortization expense due to growth projects placed in service as I previously mentioned.
And finally, MDU Resources continues to maintain a strong balance sheet and ample access to working capital to finance our operations throughout our peak seasons. Business momentum is strong as we start 2025 and we will continue to provide updates regarding our 2025 guidance and outlook as we progress throughout the year. That summarizes the financial highlights for 2024. We appreciate your interest in and commitment to MDU Resources and ask that we now open the line for questions. Operator?
Constantine, Conference Facilitator: Your first question comes from the line of Ryan Levine from Citi. Please go ahead.
Ryan Levine, Analyst, Citi: Hi, everybody. Maybe to start off, how should we interpret the change in guidance around equity issuance from no planned equity until 2027 to the current language of no near term equity issuance? Is there a change there?
Jason Volmer, Chief Financial Officer, MDU Resources Group: Yes, Ryan, this is Jason. I’ll take that one. No real change from what we talked about in November. So we had originally talked about 2027 at our Investor Day last spring. And then when we updated our capital forecast in November, it increased that amount of capital, especially when you see some additional capital in 2026, we did change that target there to say now we don’t expect any equity issuance in 2025 in our current forecast, but we would look to see some to facilitate the growth projects we’re looking to put in place in 2026.
Ryan Levine, Analyst, Citi: Okay. And then in terms of the Northwest North Dakota gas potential or pipeline expansion, can you provide a little more color around what the customer is there, capital volumes and the earnings contribution in 2028 or any way to frame that opportunity?
Nicole Covisto, President and CEO, MDU Resources Group: Yes. I can start with that and then turn it over to Bob to add a little bit color as well. But I think you’re asking about the Bakken East open season that was recently completed or which project are you talking about?
Jason Volmer, Chief Financial Officer, MDU Resources Group: The project in 2020. The new customer.
Nicole Covisto, President and CEO, MDU Resources Group: The new customer that we signed on. Yes. So that project is to serve a electric natural gas fired electric generating station in Northwest North Dakota. And you will see the capital increase in 2028 at our pipeline segment. So the punch line there is it is baked into our overall five year capital budget and would be anticipated in our overall guidance on an EPS basis of 6% to 8%.
Ryan Levine, Analyst, Citi: Is there any color around the Amana capital for that expansion or opportunity?
Nicole Covisto, President and CEO, MDU Resources Group: Yes. We haven’t quantified that specifically. But as you will note, there is a step change as you look at the outer years of the capital. And so you can kind of get your arms around a range if you look at the step change on the capital.
Ryan Levine, Analyst, Citi: Okay. And then in terms of the current guidance for $25,000,000 you mentioned the $0.04 of impact from dis synergies. Any other numbers you could speak to to quantify the step change on year over year earnings outlook?
Jason Volmer, Chief Financial Officer, MDU Resources Group: Yes. I can step in there on the $0.04 that Nicole mentioned in her remarks. That’s actually a combination of not just dis synergies but also what we saw as some one time impact. So you may have noted in my comments I talked about a customer settlement that we had in 2024 which is a non recurring type of item. We had some changes to what we see as a tax rate on state basis that resulted in some repricing of deferreds just kind of based on where we invested capital last several years.
So part of that relates to 2024 as far as an impact to non recurring items that we saw during the year. And then part of that would be related to as we look forward into some dis synergies in that. And again, neither one of these are very significant. In total, we’re talking about a $0.04 kind of change. You can kind of break that out seeing a $0.02 in 2024 related to the impact from the non recurring items and probably a couple of cents in 2025 as we look at that related to the disenergy items.
Ryan Levine, Analyst, Citi: And are there any other drivers that you wanted to highlight in terms of the year over year comparison?
Jason Volmer, Chief Financial Officer, MDU Resources Group: Yes. Overall, I think where we start is we came we’re coming off of a 22% increase on a year over year basis. So we feel like that’s certainly setting the bar pretty high from a growth perspective. So we did see some tremendous results. The pipeline that we’ve mentioned here a little bit already, the growth that we saw there, storage was a huge impact in that business.
The utility continued to perform very, very well as well within that. But certainly some outsized growth I think in 2024 given the 22% increase on a compared to adjusted number. So as we look forward, we still see if you look at the probably towards the midpoint of our range some growth on a year over year basis. We do think our long term 6% to 8% growth rate is the right number for us when we look over the long term. But we’ve just had a tremendous amount of success here the last couple of years and excited about where we’re headed into the next few years.
Nicole Covisto, President and CEO, MDU Resources Group: And the only thing I would add to that, Ryan, would be as we look at our historic ability to execute on what we’ve told investors, I think we’ve got a good track record there. And then when we look at these businesses in total, we have delivered about an 8% compound annual growth rate over the last five years. So again, Jason alluded to our one year year over year increase of 22%. If you look at that over the long term, though, that we’ve delivered about 8% in these businesses over the last five years. So that also gives us some confidence as we look ahead on that 6% to 8% EPS growth.
Ryan Levine, Analyst, Citi: Thank you.
Nicole Covisto, President and CEO, MDU Resources Group: Thank
Constantine, Conference Facilitator: Your next question comes from the line of Julien Dumoulin Smith from Jefferies. Your line is now open.
Brian Russo, Analyst, Jefferies: Yes. It’s Brian Russo on for Julian.
Nicole Covisto, President and CEO, MDU Resources Group: Hi, Brian.
Brian Russo, Analyst, Jefferies: Hello. Could you maybe if we could break down the 2025 guidance maybe more detailed into the $0.1 range. Directionally, what could get you to the high end versus the low end? I assume you got a full year of the ECAs for the data centers in North Dakota. I would think that the MYRP on the cascade side would help the gas, but maybe there’s other rate relief timing there.
And then could you quantify what normal storage margins are or what the like the year over year step down versus the solid 2024 at the pipeline segment?
Nicole Covisto, President and CEO, MDU Resources Group: Yes. So maybe I’ll start and then Jason can weigh in with some commentary as well. But as we look at that guidance range, what I’m hearing you ask is how do we range bound this? So how could we maybe get to the higher end of that range and what would be some of the key drivers? As we think about this, you heard me talk in the presentation about storage, and we did have a very strong storage year here in 2024.
Now could that continue and provide some upside or give us some benefit to be in the higher end of that range next year? Certainly, if we continue to see a strong storage year that could provide opportunity there. As we noted in our news release, we do plan for normal weather. So certainly, outside of normal weather, provide some volume opportunity within our Utility business. You mentioned the rate case activity, and we have a settlement that is on file.
We expect to hear from the Washington Commission this month on that. We do have that factored in already into the range that we have provided. But certainly, there are some gives and takes. O and M would be another thing that I point to. We’ll continue to try to move forward and contain O and M where we can, and that also provides some room within that overall range.
Jason, anything else that you would point to? Yes. I think those are all
Jason Volmer, Chief Financial Officer, MDU Resources Group: good points. I mean, you mentioned again on the rate filing. Just one thing to note there too, we expect rates on the Washington case to take effect in March based on current assumption. We’re still working with the commission on the right timing within that. So again, not a full year of benefit for that in 2024 here or 2025, but a partial year on that.
But again, excited about getting that case behind us here. You also mentioned I think DSA’s Brian and what we see on that front from serving electric load on the data center side. We are serving 180 megawatts currently. We do expect to see more of that begin to ramp in during the year. So I guess changes in timing of when some of that ramps in could move that around a little bit.
But again the $580,000,000 that we have under contract to serve now, I just want to make clear that’s going to take a couple of years to ramp all of that into our business here. So some of that will begin in 2025, so timing on that would have some impact on that range as well.
Brian Russo, Analyst, Jefferies: Okay, great. And the any insight into the Bakken East non binding MOU? I know you said you’re evaluating the results, but what would be the next steps? And are there any preliminary investment dollar amounts that you’d like to convey? I mean, we’ve heard some very large industry wide projections of nearly $1,000,000,000 for the project.
Just curious. And is what you’re seeing in the pipeline last year and your outlook, is it just increasing the dynamics, just increasing the chance of the Bakkenes to move forward?
Nicole Covisto, President and CEO, MDU Resources Group: Yes. I will certainly start here and ask Rob to provide some commentary as well. But I’ll start by saying one of the things that we talk about with investors is we really like the strategic position of our assets within the Bakken. And not only our ability to connect to other pipe, but our access to storage and that. And so this is our bread and butter in terms of the location here.
We did, as we’ve mentioned, complete the nonbinding open season and are very pleased with the results and overall level of interest that we received on the project to date. You’re asking about next steps. Next (LON:NXT) steps would be to evaluate these results and move forward and work with those that have submitted to get those indications to more of a binding. So we would move to a binding level of commitment and seek that from the customers before making a decision on the overall project. I think it goes without saying this project would be incremental to the five year forecast that we have in front of investors today.
And you’re asking about the sizing. Really, this is going to depend on the length of the pipe, how much customer interest we have. And so at this point, we have not come out with any borders around the overall level
Jason Volmer, Chief Financial Officer, MDU Resources Group: of investment. And some of
Nicole Covisto, President and CEO, MDU Resources Group: that will be predicated on level of binding binding interest. So with that being said, I’m looking to Rob and Jason to see if they would have anything they would want to add to that.
Rob Johnson, President of WBI Energy, MDU Resources Group: No, Nicole. I think you summarized it well. Like I said, very pleased with the results of the open season. And now it will be just to finalize the details around the project itself and determine overall size and length like you mentioned.
Jason Volmer, Chief Financial Officer, MDU Resources Group: Okay, great. Thank you very much.
Constantine, Conference Facilitator: This marks the last call for questions. The webcast can be accessed at www.mdu.com under the Investors heading. Select Events and Presentations and click Year End twenty twenty four Earnings Conference Call. After the conclusion of the webcast, a replay will be available at the same location.
Nicole Covisto, President and CEO, MDU Resources Group: For your interest in MDU Resources. We are looking forward to 2025 and beyond. We appreciate your continued interest in our company, and we’ll keep you posted as we move forward. Thank you for joining the call today. Operator, back
Jason Volmer, Chief Financial Officer, MDU Resources Group: to you. This
Constantine, Conference Facilitator: concludes today’s MDU Resources Group conference call. Thank you very much for your participation. You may now disconnect.
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