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Otter Tail Corp. (OTTR)
NASDAQ:OTTR
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Otter Tail
(NASDAQ:OTTR)
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Rating:72Outperform
Price Target:
$98.00
▲(14.51% Upside)
Action:ReiteratedDate:02/18/26
OTTR scores well on solid profitability and an improving leverage profile, supported by a constructive technical trend and reasonable valuation. The score is held back by inconsistent free cash flow, 2025 margin compression, and earnings-call guidance pointing to near-term EPS pressure (notably Plastics) plus execution/timing risks.
Positive Factors
Regulated electric rate base growth
A sustained 10% rate base CAGR and $1.9B capex plan imply predictable, regulated asset growth that converts near one-for-one to EPS. This underpins durable revenue and earnings visibility, supporting long-term capital recovery and financing of grid modernization investments.
Strong utility ROE and liquidity
A 16% utility ROE and ample liquidity reflect efficient regulated operations and improving leverage. Combined with a stated ability to fund the plan without parent equity through 2030, this enhances financial flexibility to fund capex and dividends while limiting dilution risk.
Renewables and storage investments
Investment in wind repowering and battery storage improves generation efficiency, extends subsidy life, and diversifies resource mix. These durable infrastructure upgrades support reliable rate-base growth, lower operating fuel exposure, and align with long-term decarbonization trends.
Negative Factors
Plastics earnings volatility
Plastics segment outcomes hinge on volatile PVC pricing and end-market demand. A multi-year decline and normalization timeline to 2028 create meaningful downside to consolidated EPS and make multi-year forecasting and capital allocation more uncertain for the company.
Inconsistent free cash flow
Despite solid operating earnings, uneven FCF conversion and recent declines reduce ability to self-fund discretionary actions. High capex cycles typical of utilities can pressure cash generation, constraining buffer for outages, surprises, or accelerated shareholder returns.
Project and large-load timing risk
Transmission siting issues, regulatory complaints and uncontracted large loads create timing and execution risk for rate-base projects. Delays can defer revenue recovery, increase costs, and weaken near- to medium-term returns from planned investments.
Otter Tail (OTTR) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$3.61B
Dividend Yield2.54%
Average Volume (3M)264.95K
Price to Earnings (P/E)13.2
Beta (1Y)0.45
Revenue Growth-3.18%
EPS Growth-8.62%
CountryUS
Employees2,133
SectorIndustrials
Sector Strength72
IndustryDiversified Utilities
Share Statistics
EPS (TTM)1.23
Shares Outstanding41,953,526
10 Day Avg. Volume364,154
30 Day Avg. Volume264,950
Financial Highlights & Ratios
PEG Ratio-1.41
Price to Book (P/B)1.82
Price to Sales (P/S)2.59
P/FCF Ratio34.55
Enterprise Value/Market Cap1.19
Enterprise Value/Revenue3.30
Enterprise Value/Gross Profit8.47
Enterprise Value/Ebitda8.92
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusHold
Number of Analyst Covering2
EPS Forecast (FY)5.63
Revenue Forecast (FY)$1.31B
Otter Tail Business Overview & Revenue Model
Company DescriptionOtter Tail Corporation, together with its subsidiaries, engages in electric utility, manufacturing, and plastic pipe businesses in the United States. The company's Electric segment produces, transmits, distributes, and sells electric energy in Minnesota, North Dakota, and South Dakota; and operates as a participant in the Midcontinent Independent System Operator, Inc. markets. This segment generates electricity through coal, wind and hydro, and natural gas. It serves approximately 133,000 residential, industrial, and other commercial customers. Its Manufacturing segment engages in the contract machining, metal parts stamping, fabrication and painting, and production of plastic thermoformed horticultural containers, life science and industrial packaging, and material handling components, and extruded raw material stock for recreational vehicle, agricultural, construction, lawn and garden, and industrial and energy equipment industries. It also manufactures clamshell packing, blister packs, returnable pallets, and handling trays for shipping and storing odd-shaped or difficult-to-handle parts for customers in the horticulture, medical and life sciences, industrial, recreation, and electronics industries. The company's Plastics segment manufactures polyvinyl chloride pipes for municipal water, rural water, wastewater, storm drainage and water reclamation system, and other uses. This segment markets its products to wholesalers and distributors through independent sales representatives, company salespersons, and customer service representatives. The company was formerly known as Otter Tail Power Company and changed its name to Otter Tail Corporation in 2001. Otter Tail Corporation was founded in 1907 and is headquartered in Fergus Falls, Minnesota.
How the Company Makes MoneyOtter Tail generates revenue primarily through its Electric segment, which accounts for a significant portion of its income by charging customers for electricity usage. This revenue model includes residential, commercial, and industrial sales, with rates regulated by state utility commissions. Additionally, the company’s Manufacturing segment contributes to its earnings through the sale of custom manufactured products and services to various industries. Key revenue streams include long-term contracts with customers and participation in renewable energy projects, which can provide additional financial incentives. Partnerships with local governments and other organizations for infrastructure projects also play a role in enhancing revenue opportunities for Otter Tail.
Otter Tail Earnings Call Summary
Earnings Call Date:Feb 16, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 04, 2026
Earnings Call Sentiment Neutral
The call conveyed clear strengths in the regulated electric utility business — solid rate base growth (10% five-year CAGR), positive electric segment momentum (7% YoY and projected +14% in 2026), strong liquidity ($386M cash) and a sector-leading ROE of 16% — along with disciplined capital planning and shareholder-friendly actions (10% dividend increase). Offsetting these positives are meaningful near-term headwinds in the Manufacturing and Plastics segments (Plastics down 15% in 2025 and an expected ~36% decline in 2026), declines in consolidated EPS (9% YoY) and project/timing risks on transmission and large loads. Management expects Plastics to normalize by 2028 and reiterated no external equity needs through 2030. Overall the operational and financial foundation is solid, but near-term earnings pressure from non-utility segments and some project timing risks balance the upside.Q4-2025 Updates
Positive Updates
Full-Year EPS and Guidance Context
Reported 2025 diluted EPS of $6.55 (down 9% YoY) and the result was toward the upper end of 2025 guidance; initiating 2026 EPS guidance range of $5.22–$5.62 with a midpoint of $5.42.
Electric Segment Strength
Electric segment earnings increased over 7% year-over-year (increase of $0.16 per share) driven by rate base recovery, higher residential and commercial sales volumes and favorable weather vs 2024; Electric segment expected to increase 14% in 2026 supported by a 14% increase in average rate base.
Rate Case Progress and Interim Revenues
Minnesota interim rate revenues of $28.6M effective 01/01/2026 and South Dakota interim rate revenues of $5.7M effective 12/01/2025 (both subject to refund); anticipate final Minnesota rates in mid-2027.
Rate Base Growth and Capital Plan
Reaffirmed five-year Otter Tail Power rate base compounded annual growth rate (CAGR) of 10% with a five-year capital spending plan totaling $1.9B; company expects near one-to-one conversion of rate base growth into EPS growth.
Renewables and Storage Investments
Completed wind repowering (expected +20% output and additional 10 years of renewable tax credits); advancing battery storage project (75 MW, 4-hour duration, ~$120M capex) with Minnesota rider recovery approved and expected online in 2028; Solway Solar construction underway and Abercrombie Solar development assets acquired (Solway operational ~2026/early 2027; Abercrombie 2028).
Strong Balance Sheet and Liquidity
Ended 2025 with $386M cash on hand; reported utility sector-leading return on equity of 16% on an equity layer of 63%; balance sheet expected to fund capital plan without external equity through at least 2030.
Dividend Increase and Shareholder Return Targets
Announced a 10% dividend increase to an annual indicated dividend of $2.31 per share (second consecutive double-digit increase); targeting long-term EPS growth of 7%–9% and targeted total shareholder return of 10%–12%.
Manufacturing and Plastics Capacity Investments
New BTD Georgia facility ready, Vinyltech phase two near completion and Northern Pipe Products pursuing a ~20M pound capacity increase (available ~2028); Plastics sales volumes increased 8% YoY supporting recovery opportunities.
Plastics Input Cost Improvement
Material input costs, including PVC resin, decreased ~14% year-over-year, partially offsetting declines in average sales prices.
No Parent-Level Equity Need and Debt Plan
Plan to retire $80M parent-level debt maturing later this year and not replace it, leaving no outstanding parent-level debt; intend to issue debt at utility level annually to fund investments while maintaining authorized capital structure.
Negative Updates
Decline in Consolidated EPS
Consolidated diluted EPS declined 9% YoY to $6.55 in 2025 and 2026 guidance midpoint ($5.42) implies a further decrease versus 2025.
Plastics Segment Earnings Compression
Plastics segment earnings decreased $0.72 per share (15% YoY) in 2025 and management expects Plastics earnings to decline ~36% in 2026 as average PVC pipe prices continue to recede; management expects normalization only by 2028 to a $45M–$50M annual earnings range.
Accelerated PVC Price Declines
Average PVC sales prices decreased 15% from 2024 on average, with the rate of decline accelerating during 2025 (average sales price ~20% lower than same time last year); company expects average PVC price in 2026 to be ~20% lower than 2025.
Manufacturing Demand Headwinds
Manufacturing segment earnings decreased $0.06 per share (16% YoY) due to soft end-market demand (notably lawn & garden and agriculture), dealer inventory overhang, and competitive pressure from low-cost importers in horticulture.
Transmission Project Risks and Delays
Development delays and resistance on MISO Tranche 1 (landowner and local government siting challenges) and a FERC complaint against MISO Tranche 2.1 that could delay project timing and benefits.
Large Load Uncertainty
Large load pipeline removed a 155 MW load that went into service; a 430 MW data center opportunity remains in phase two but is not yet contracted, creating uncertainty for potential incremental investments and timing.
Customer Bill Pressure
Projected customer bill increases of 3%–4% CAGR over the five-year planning period (with potential year-to-year variability and jurisdictional differences) which could be a customer affordability concern.
Higher Depreciation, Interest and Corporate Costs
Rate base investments are increasing depreciation and interest expense; corporate costs expected to increase in 2026 due to lower investment income and higher labor costs, which will partially offset utility earnings growth.
Plastics Earnings Uncertainty
Management noted difficulty predicting long-term Plastics earnings with potential for material variance from projections, adding execution and forecasting risk to overall earnings growth targets.
Company Guidance
Otter Tail initiated 2026 diluted EPS guidance of $5.22–$5.62 (midpoint $5.42) — a midpoint that it says will produce an above‑average ROE of ~12% — while reiterating a five‑year Otter Tail Power rate base CAGR of 10% (converting to EPS growth near a one‑to‑one ratio) and a $1.9 billion five‑year capital plan; Electric segment earnings are expected to rise ~14% in 2026 alongside a ~14% increase in average rate base (driven by wind repower and solar), Manufacturing earnings are expected to increase ~7%, and Plastics earnings are expected to decline ~36% in 2026 (with PVC prices ~20% below 2025 on average and Plastics normalizing to $45–$50M of annual earnings by 2028). Key numeric items supporting the guidance include interim Minnesota and South Dakota rate revenues of $28.6M and $5.7M, respectively; a $120M, 75 MW / 4‑hour battery project expected online in 2028; a completed wind repower improving output ~20% and extending 10 years of tax credits; projected five‑year customer bill CAGR of 3–4%; consolidated 2025 EPS of $6.55, $386M cash on hand, utility ROE of 16% on a 63% equity layer, no external equity needed through at least 2030, and targets of long‑term EPS growth of 7–9% and total shareholder return of 10–12%.Otter Tail Financial Statement Overview
Summary
Strong profitability and a steadily de-risking balance sheet support the profile, but 2025 margin compression and uneven free-cash-flow conversion (with historically volatile FCF) reduce financial quality and flexibility.Income Statement
Profitability is strong for a utility, with consistently healthy operating and net margins (net margin ~19%–23% from 2022–2025) and solid earnings levels. However, the growth profile is choppy: revenue fell in 2023 and 2024, and while 2025 rebounded sharply (+38%), margins compressed meaningfully in 2025 versus 2024 (gross margin dropped from ~44% to ~28%), signaling weaker pricing/mix and/or cost pressure.78
Positive
Balance Sheet
Leverage looks reasonable and improving, with debt-to-equity moving down from ~0.97 (2020) to ~0.59 (2025) alongside a steady build in equity. Returns on equity remain solid (generally mid-teens to low-20s), though they have moderated from the 2022 peak. Overall balance sheet quality is good, but absolute debt is still meaningful and has risen versus earlier years, which can constrain flexibility if rates or capital needs rise.74
Positive
Cash Flow
Operating cash generation is generally supportive of earnings (operating cash flow running around or above net income in 2022–2025), but free cash flow is inconsistent and relatively low versus profits in recent years (about 21%–29% of net income from 2023–2025). Free cash flow also declined in 2024 and 2025, and the history includes a notably negative free cash flow year in 2020, pointing to ongoing reinvestment/capex volatility typical of utilities.62
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.30B | 1.33B | 1.35B | 1.46B | 1.20B |
| Gross Profit | 362.70M | 583.10M | 565.15M | 570.50M | 424.07M |
| EBITDA | 463.79M | 515.83M | 499.12M | 486.15M | 341.95M |
| Net Income | 275.89M | 301.66M | 294.19M | 284.18M | 176.77M |
Balance Sheet | |||||
| Total Assets | 3.96B | 3.65B | 3.24B | 2.90B | 2.75B |
| Cash, Cash Equivalents and Short-Term Investments | 440.50M | 294.65M | 230.37M | 119.00M | 1.54M |
| Total Debt | 1.10B | 1.01B | 905.48M | 832.02M | 855.16M |
| Total Liabilities | 2.10B | 1.98B | 1.80B | 1.68B | 1.76B |
| Stockholders Equity | 1.86B | 1.67B | 1.44B | 1.22B | 990.78M |
Cash Flow | |||||
| Free Cash Flow | 97.92M | 94.08M | 117.36M | 218.18M | 59.41M |
| Operating Cash Flow | 385.99M | 452.73M | 404.50M | 389.31M | 231.24M |
| Investing Cash Flow | -290.72M | -411.37M | -289.29M | -175.07M | -171.51M |
| Financing Cash Flow | -3.72M | 22.92M | -3.83M | -96.78M | -59.36M |
Otter Tail Technical Analysis
Neutral
85.58
Price Trends
85.06
Positive
82.33
Positive
80.43
Positive
Market Momentum
0.10
Positive
47.03
Neutral
35.68
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For OTTR, the sentiment is Neutral. The current price of 85.58 is below the 20-day moving average (MA) of 86.63, above the 50-day MA of 85.06, and above the 200-day MA of 80.43, indicating a neutral trend. The MACD of 0.10 indicates Positive momentum. The RSI at 47.03 is Neutral, neither overbought nor oversold. The STOCH value of 35.68 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for OTTR.
Otter Tail Risk Analysis
Otter Tail disclosed 32 risk factors in its most recent earnings report. Otter Tail reported the most risks in the "Legal & Regulatory" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Otter Tail Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $3.61B | 13.15 | 16.10% | 2.54% | -3.18% | -8.62% | |
66 Neutral | $3.02B | 22.22 | 10.80% | 2.36% | 8.26% | 12.47% | |
64 Neutral | $5.56B | 18.51 | 7.96% | 3.91% | 7.03% | 6.64% | |
64 Neutral | $4.27B | 23.59 | ― | 4.09% | 4.90% | -4.42% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
60 Neutral | $3.47B | 18.13 | 7.28% | 5.10% | 2.14% | -6.51% |
* Industrials Sector Average
OTTR
Otter Tail
85.58
8.17
10.56%
AVA
Avista
39.77
1.81
4.76%
BKH
Black Hills
73.83
15.93
27.50%
MGEE
MGE Energy
82.36
-6.84
-7.67%
NWE
Northwestern
69.82
17.43
33.27%
Otter Tail Corporate Events
Business Operations and StrategyExecutive/Board Changes
Otter Tail adds experienced utility leaders to its board
Positive
Dec 18, 2025
On December 16–18, 2025, Otter Tail Corporation announced that longtime independent director Steven L. Fritze, who has served on the Board since 2013 and led the Audit Committee, will retire at the April 2026 Annual Meeting of Shareholders upon reaching the mandatory retirement age, and that Christopher B. Clark and Steve P. Rasche have been appointed to the Board effective January 1, 2026. Clark, the former president of Xcel Energy’s Northern States Power utility operations, and Rasche, the former chief financial officer of regional utility holding company Spire Inc., bring deep experience in regulated energy, utility finance and risk management; they will serve on key Board committees and receive compensation consistent with other non-employee directors, signaling Otter Tail’s intent to reinforce its governance, regulatory expertise and financial oversight as it advances its corporate strategy in the utility and manufacturing sectors.
The most recent analyst rating on (OTTR) stock is a Buy with a $91.00 price target. To see the full list of analyst forecasts on Otter Tail stock, see the OTTR Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.