MDU Resources Affirms 2024 Guidance, Updates Long-Term Earnings Per Share Guidance

Rhea-AI Summary

MDU Resources Group, Inc. affirms 2024 financial guidance and updates long-term earnings per share growth rate outlook. The company expects earnings from regulated energy delivery and construction services revenues to remain strong. MDU Resources plans a tax-free spinoff of its construction services business in late 2024.

Positive

• MDU Resources affirms its 2024 financial guidance and updates its long-term earnings per share growth rate outlook.
• Earnings from regulated energy delivery and construction services revenues are expected to be robust.
• The company anticipates a tax-free spinoff of its construction services business in late 2024.

Negative

• None.

Financial Analyst

MDU Resources Group's affirmation of its 2024 financial guidance suggests a stable outlook for the company's regulated energy delivery and construction services segments. The projected earnings range of $170 million to $180 million for the energy delivery business indicates a consistent performance year-over-year. Importantly, the construction services revenue forecast of $2.9 billion to $3.1 billion, with stable margins and an EBITDA of $220 million to $240 million, demonstrates confidence in the operational efficiency and market demand for these services.

The exclusion of transaction costs and the costs of establishing the construction services as a separate public entity in the guidance indicates a strategic move to present a cleaner financial picture to investors. This separation could potentially unlock value and provide more focused investment opportunities. However, the lack of inclusion of these costs could also mean that the market has limited visibility into the full financial impact of the spinoff until it is completed.

MDU's long-term earnings per share growth rate of 6% to 8% post-spinoff is an ambitious target that signals to investors the company's confidence in its core business and future prospects. This growth rate is contingent on several factors, including normal weather and economic conditions, which are inherently unpredictable. Therefore, while the outlook is positive, investors should consider the potential volatility of these external factors.

Market Research Analyst

MDU Resources' forecasted customer growth of 1% to 2% annually in the electric and natural gas segments is in line with industry standards for utility companies, which typically see modest but stable growth. The assumption of no planned equity issuances suggests that the company is not expecting to dilute current shareholders' value in the near term, which could be seen as a positive signal for investor sentiment.

The company's guidance relies on 'normal' weather and operating conditions, which is a standard industry approach, but it is crucial for investors to recognize the risk that adverse weather events or economic downturns could impact these projections. The company's ability to secure necessary equipment and materials also points to a well-managed supply chain, but given global economic uncertainties, this could be an area of risk.

The planned spinoff of the construction services business is a significant restructuring move that could lead to increased market focus and improved capital allocation. Investors should monitor how the market reacts to the spinoff, as it could influence the stock's performance leading up to and following the completion of the transaction.

Economist

The financial guidance provided by MDU Resources reflects broader economic assumptions such as normal economic and operating conditions. These assumptions are critical as they underpin the company's ability to meet its financial targets. The construction services sector's performance is often seen as a bellwether for the economy and stable revenues in this segment could suggest a positive outlook for the construction industry and the economy as a whole.

However, investors should be aware that the construction industry is cyclical and sensitive to changes in the economy, such as interest rate hikes or a slowdown in economic growth. These factors could affect the demand for construction services and ultimately impact MDU's financial performance.

The anticipated 6% to 8% long-term compound annual growth rate in earnings per share post-spinoff will depend on the company's ability to capitalize on economic growth, manage costs effectively and navigate regulatory environments. This growth rate, if achieved, would compare favorably to the average growth rate of the utility sector, which is often considered a defensive sector with lower growth prospects.

BISMARCK, N.D., March 13, 2024  /PRNewswire/ -- MDU Resources Group, Inc. (NYSE: MDU) announced that it is affirming 2024 financial guidance and providing an updated long-term earnings per share growth rate outlook in advance of planned investor meetings today.

MDU Resources affirmed its 2024 guidance information, which was previously provided Feb. 8 in connection with the announcement of its 2023 earnings results. For 2024, it still expects:

• Earnings from its regulated energy delivery business in the range of $170 million to $180 million.
• Construction services revenues in the range of $2.9 billion to $3.1 billion, with margins comparable to 2023, and EBITDA of $220 million to $240 million. EBITDA in a non-GAAP financial measure. A reconciliation is provided in the "Non-GAAP Financial Measures" section in this news release.

MDU Resources' guidance does not include transaction costs or costs associated with standing up the construction services business as a separate public company. The announced tax-free spinoff of its construction services business is expected to be complete in late 2024.

The expected 2024 results are based on these assumptions:

• Normal weather for the year, including precipitation and temperatures, across all company markets.
• Normal economic and operating conditions.
• Continued availability of necessary equipment and materials.
• Electric and natural gas customer growth continuing at a rate of 1% to 2% annually.
• No planned equity issuances.

Following the spinoff of the construction services business, MDU Resources anticipates 6% to 8% long-term compound annual growth on earnings per share.

MDU Resources will host an Analyst and Investor Day at 10 a.m. EDT today at the New York Stock Exchange. Those interested in participating can register to attend the event via webcast at www.mdu.com/investor-day.

About MDU Resources
MDU Resources Group, Inc., a member of the S&P MidCap 400 index, provides essential products and services through its regulated energy delivery and construction services businesses. For more information about MDU Resources, visit www.mdu.com or contact the Investor Relations Department at investor@mduresources.com.

Forward-Looking Statements
The information in this release includes certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. The forward-looking statements contained in this release, including information about the planned spinoff of MDU Construction Services Group, 2024 financial guidance and anticipated long-term earnings per share growth, are expressed in good faith and are believed by the company to have a reasonable basis. Nonetheless, actual results may differ materially from the projected results expressed in the forward-looking statements. Although the company believes that its expectations are based on reasonable assumptions, there is no assurance the company's projections, including financial guidance or other proposed strategies such as the pursuit of a tax-free spinoff of its construction services business and proposed future structure of a pure-play regulated energy delivery company, will be achieved. For a discussion of important factors that could cause actual results to differ materially from those expressed in the forward-looking statements, refer to Item 1A-Risk Factors in MDU Resources' most recent Form 10-K and 10-Q and subsequent filings with the SEC.

Changes in such assumptions and factors could cause actual future results to differ materially from growth and financial guidance. All forward-looking statements in this news release are expressly qualified by such cautionary statements and by reference to the underlying assumptions. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Except as required by law, the company does not undertake to update forward-looking statements, whether as a results of new information, future events or otherwise.

Non-GAAP Financial Measures
The company, in addition to presenting its earnings in conformity with GAAP, has provided a non-GAAP financial measure of 2024 EBITDA guidance. The company defines EBITDA from continuing operations as income (loss) from continuing operations before interest; taxes; and depreciation and amortization.

The company believes this non-GAAP financial measure provides meaningful information to investors about operational efficiency compared to the company's peers by excluding the impacts of differences in tax jurisdictions and structures, debt levels and capital investment. The company's management uses the non-GAAP financial measure in conjunction with GAAP results when evaluating the company's operating results and calculating compensation packages. Non-GAAP financial measures are not standardized; therefore, it may not be possible to compare such financial measure with other companies' non-GAAP financial measures having the same or similar names. The presentation of this additional information is not meant to be considered a substitution for financial measures prepared in accordance with GAAP. The company strongly encourages investors to review the consolidated financial statements in their entirety and to not rely on any single financial measure.

The following table provides a reconciliation of GAAP income from continuing operations to EBITDA for forecasted results.

EBITDA Guidance Reconciliation for 2024
	Construction Services
	Low	High
	(In millions)
Income from continuing operations	$        135.0	$        150.0
Adjustments:
Interest expense	15.0	15.0
Income taxes	45.0	50.0
Depreciation and amortization	25.0	25.0
EBITDA from continuing operations	$        220.0	$        240.0

Media Contact: Laura Lueder, manager of communications and public relations, 701-530-1095
Investor Contact: Brent Miller, assistant treasurer, 701-530-1730

 

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SOURCE MDU Resources Group, Inc.

What is MDU Resources Group, Inc. affirming in the press release?

MDU Resources is affirming its 2024 financial guidance and updating its long-term earnings per share growth rate outlook.

What are the expected earnings from MDU Resources' regulated energy delivery business for 2024?

MDU Resources expects earnings from its regulated energy delivery business in the range of $170 million to $180 million.

What are the construction services revenues expected to be for 2024?

Construction services revenues are expected to be in the range of $2.9 billion to $3.1 billion, with margins comparable to 2023.

When is the tax-free spinoff of MDU Resources' construction services business expected to be complete?

The tax-free spinoff of MDU Resources' construction services business is expected to be complete in late 2024.

What assumptions are the expected 2024 results based on?

The expected 2024 results are based on assumptions including normal weather, economic conditions, equipment availability, and customer growth rate.

What long-term compound annual growth on earnings per share does MDU Resources anticipate after the spinoff of the construction services business?

MDU Resources anticipates 6% to 8% long-term compound annual growth on earnings per share following the spinoff of the construction services business.