Yahoo Finance MDU Resources (MDU) to Gain From Investments & Spin-Off
MDU Resources’ MDU has a well-built two-platform business model that helps balance seasonality risks. It is well poised to benefit from strategic acquisitions and a rising backlog.
MDU - which currently has a Zacks Rank #3 (Hold) - is subject to stiff competition in terms of price, delivery time and proximity to customers
Tailwinds
MDU Resources’ two-platform business model, regulated energy delivery platform and construction materials and services platform include different operating segments. This two-platform strategy helps to balance out seasonality-related risks that adversely impact demand.
The utility’s planned separation of Knife River Corporation, a wholly-owned construction materials business, to be completed on May 31, 2023, will unlock great value for the existing shareholders. Of the issued and outstanding shares, 90% are to be distributed to stockholders. The split will create two entities - one focusing on regulated energy delivery and the other on the construction materials and contracting business.
Steady earnings enable the company to distribute regular dividends to its shareholders. MDU Resources has an amazing track record of paying out dividends for the past 85 consecutive years. The company raised its annual dividend in November 2022, marking the 32nd consecutive year of an increase. Its new annualized dividend is 89 cents per share.
Headwinds
MDU Resources’ business is subject to stringent government regulations, fluctuating fuel costs, market fluctuations associated with higher interest rates and commodity prices, aging infrastructure and highly seasonal business operations.
The company frequently requires access to capital markets for significant capital investments. In a rising interest rate environment, it might not be possible for the company to access capital at competitive rates. This can also hurt MDU’s operating and financial results.
Stocks to Consider
Some better-ranked utilities in the same sector are NewJersey Resources NJR, Edison International EIX and NiSource NI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for NewJersey Resources, Edison International and NiSource’s 2023 earnings per share indicates an increase of 5.6%, 2.6% and 6.8%, respectively.
Long-term (three- to five-year) earnings growth of NewJersey Resources, Edison International and NiSource is pegged at 6%, 3.9% and 6.9%, respectively.
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NiSource, Inc (NI) : Free Stock Analysis Report
Edison International (EIX) : Free Stock Analysis Report
MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
NewJersey Resources Corporation (NJR) : Free Stock Analysis Report
