Otter Tail Corp (OTTR) Tops Q2 EPS by 3c; Reaffirms

August 8, 2016 6:03 PM EDT
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Otter Tail Corp (NASDAQ: OTTR) reported Q2 EPS of $0.41, $0.03 better than the analyst estimate of $0.38. Revenue for the quarter came in at $203.5 million versus the consensus estimate of $194 million.


Otter Tail Corp reaffirms FY2016 EPS of $1.50-$1.65.

“Our team delivered broad-based and solid earnings growth for the second quarter of 2016 over the second quarter of 2015,” said Otter Tail Corporation President and CEO Chuck MacFarlane. “Our Manufacturing segment drove operating margin improvements while our Electric segment benefited from strong sales to pipeline customers and higher revenue from interim rates, which are subject to refund.

“We continue to execute our capital investment plan at Otter Tail Power Company under a constructive regulatory framework. Our $858 million utility capital spending plan for 2016 through 2020 includes two large regional transmission projects and several generation investments. We expect these to drive a compounded annual growth rate of 8.0% in utility rate base through 2020, using 2014 as the base year.

“A resource plan filed with the Minnesota Public Utilities Commission (MPUC) in June proposes a 248‑megawatt simple-cycle natural gas combustion turbine, 200 megawatts of additional wind energy and 30 megawatts of solar energy in the next five years.

“Meanwhile, the two 345-kilovolt transmission projects that are part of our capital investment plan have begun construction. They are on budget and on schedule for completion in 2017 and 2019, respectively. Named Big Stone South-Brookings and Big Stone South-Ellendale, both are Midcontinent Independent System Operator-approved multi-value projects. Otter Tail Power Company is a 50% owner with other regional utilities in both and manages the Big Stone South-Ellendale project.

“Otter Tail Power Company filed a rate case with the MPUC in February, seeking permission to increase rates by approximately $19.3 million annually, or 9.8%. We expect intervenors to file testimony in mid-August and the MPUC to make a final determination in 2017. The MPUC granted a 9.56% interim rate increase, subject to refund, which began April 16 while it considers the overall request. We expect to recognize 8.5 months of increased revenues under interim rates, subject to refund, in 2016.

“Quarter-over-quarter net income at BTD, our custom metal fabricator, improved mainly due to improved productivity at all its facilities and increased sales at its Illinois plant. The recreational vehicle market continues to soften, adding to depressed markets for manufactured equipment in oil and gas extraction and agriculture. Original equipment manufacturers in these markets are BTD’s customers. We expect BTD to be in a good position to enhance earnings when market conditions improve. BTD’s Minnesota facilities expansion is complete. All plants have streamlined operations and the new state-of-the-art paint system is receiving orders.

“Our Plastics segment, Northern Pipe Products and Vinyltech, experienced a significant 19.2% increase in pipe sales quarter over quarter but at lower margins as the spread between sales and raw material prices has narrowed in 2016. Both companies are efficient, low-cost operators, but we expect margins to remain compressed for the balance of the year.

“We are reaffirming our 2016 diluted earnings per share guidance range of $1.50 to $1.65.”

For earnings history and earnings-related data on Otter Tail Corp (OTTR) click here.

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