Otter Tail’s Earnings Call: Growth Amid Challenges

Otter Tail ((OTTR)) has held its Q1 earnings call. Read on for the main highlights of the call.

Otter Tail Corporation’s recent earnings call presented a mixed sentiment, reflecting both achievements and challenges. The company reported growth in its Electric segment and successful completion of rate cases, alongside strategic expansions. However, it also faced a decline in overall earnings per share and pressures in its Manufacturing and Plastics segments, compounded by broader economic uncertainties.

Electric Segment Earnings Growth

The Electric segment of Otter Tail Corporation experienced a notable 10% earnings increase in the first quarter. This growth was attributed to favorable weather conditions, increased sales volumes, and enhanced rider revenues stemming from ongoing capital investments.

Successful Rate Case Completion

Otter Tail Power successfully concluded its North Dakota rate case, implementing new base rates in March. This development was perceived as both constructive and balanced, contributing positively to the company’s financial framework.

BTD Georgia Facility Expansion

The completion of the BTD Georgia facility expansion positions Otter Tail for significant growth in the Southeast market. This strategic move is expected to boost production capacity, potentially adding up to $35 million in incremental annual sales.

Strong Balance Sheet

Otter Tail maintains a robust financial position with a 62% consolidated equity layer and over $600 million in available liquidity. The company does not anticipate any external equity issuances for at least the next five years, underscoring its financial stability.

Plastics Segment Volume Increase

In the first quarter, the Plastics segment saw a 13% increase in sales volumes, driven by strong distributor and end market demand, as well as capacity expansion efforts.

Decline in Overall Earnings Per Share

Despite some positive developments, Otter Tail reported an 8% decline in diluted earnings per share for the first quarter compared to the previous year, highlighting areas needing attention.

Manufacturing Segment Challenges

The Manufacturing segment faced difficulties, with decreased earnings due to lower sales volumes and increased production costs. These challenges were particularly evident in the recreational vehicles and agricultural equipment markets.

Plastics Segment Pricing Pressure

The Plastics segment experienced an 11% decline in the average sales price of PVC pipe in the first quarter compared to the previous year, continuing a downward trend since mid-2022.

Uncertainty in Macroeconomic Conditions

Otter Tail is navigating heightened uncertainty due to U.S. trade policy and macroeconomic conditions, which are impacting its investment and cost recovery strategies.

Forward-Looking Guidance

Otter Tail Corporation provided detailed guidance for 2025, affirming its earnings expectations with a midpoint of $5.88 per share. Despite challenges, the Electric segment is expected to grow by approximately 7%, while the Manufacturing and Plastics segments may face declines. The company plans to continue strategic capital investments, aiming for a 9% compounded annual growth rate in its rate base through 2029, without issuing new equity for at least five years.

In summary, Otter Tail Corporation’s earnings call highlighted a blend of positive growth initiatives and existing challenges. The company’s strategic expansions and strong financial position are promising, yet it must address pressures in certain segments and navigate economic uncertainties to sustain its growth trajectory.