Otter Tail (OTTR) Q2 2024 earnings summary

Executive summary

• Q2 2024 diluted EPS rose 6% year-over-year to $2.07, with net income increasing to $87.0 million, driven by strong Plastics and Manufacturing segment performance and lower operating expenses.

• Operating revenues reached $342.3 million, up from $337.7 million in Q2 2023, with Plastics growth offsetting declines in Electric and Manufacturing.

• 2024 earnings guidance midpoint raised by 8% to $6.92 per share, with a projected ROE of 18.7%.

• Indicated 2024 dividend increased 6.9% to $1.87 per share.

• Regulatory approval for the Integrated Resource Plan enables significant renewable energy additions and designates Coyote Station as emergency-only.

Financial highlights

• Plastics segment sales volumes increased 26% year-over-year, offsetting a 13% decline in sales prices; operating income grew 9.4% to $75.0 million.

• Manufacturing segment earnings up 15% year-over-year, benefiting from higher BTD margins and cost reductions, despite lower sales volumes.

• Electric segment earnings decreased 6% year-over-year, mainly due to unfavorable weather and lower transmission revenue.

• Cash and cash equivalents exceeded $230 million as of June 30, 2024, with total liquidity of $548.7 million.

• Net cash provided by operating activities for the first half of 2024 was $223.5 million, up $39.0 million year-over-year.

Outlook and guidance

• 2024 EPS guidance raised to $6.77–$7.07, up from prior $6.23–$6.53, with ROE expected at 18.7%.

• Electric segment guidance maintained despite weather headwinds; manufacturing outlook lowered due to softening demand.

• Plastics segment guidance increased on strong Q2 results and slower-than-expected price declines.

• Anticipated 2024 earnings mix: 31% electric, 69% non-electric.

• Long-term EPS and dividend growth rates targeted at 5–7%, with total shareholder return of 8–10%.