MDU RESOURCES GROUP INC (MDU)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 showed a mixed print: revenue beat but EPS missed. Operating revenue rose to $351.2M, above S&P Global consensus $303.0M*, while diluted EPS from continuing ops was $0.07 vs $0.13*; higher O&M (payroll, planned outage) and warmer weather drove the EPS shortfall .
• Guidance narrowed: FY25 EPS range trimmed to $0.88–$0.95 from $0.88–$0.98, reflecting midyear weather/O&M impacts; long‑term 6–8% EPS CAGR unchanged .
• Pipeline remained a bright spot (net income $15.4M) on growth projects and short‑term capacity demand; electric saw data‑center load (retail kWh +12.0%) but O&M inflation and a planned outage compressed profits; natural gas had a seasonal loss on warmer weather and higher payroll/software costs .
• Stock reaction catalysts: data‑center load ramp (580 MW ESAs; staged online 2025–2027), ND PSC Badger Wind approvals in process, and a post‑quarter dividend hike to $0.14 (annualized $0.56) support the medium‑term narrative despite near‑term EPS pressure .

What Went Well and What Went Wrong

• What Went Well

  • Pipeline execution and demand: “a very solid” second quarter excluding a $1.5M net‑of‑tax 2024 settlement; higher transportation revenue from growth projects and short‑term contracts supported results (NI $15.4M) .
  • Data center demand materially lifting electric volumes: retail electric volumes +12.0% YoY, with a capital‑light model and 580 MW under ESAs (180 MW online; 100 MW expected late 2025; 150 MW in 2026; 150 MW in 2027) .
  • Regulatory progress and capital plan visibility: narrowed EPS guidance with intact 6–8% long‑term EPS CAGR and 7–8% rate‑base growth outlook; Badger Wind ADP/CPCN filed and hearing scheduled (later approved post‑quarter) .

• What Went Wrong

  • O&M inflation and outage costs pressured earnings: electric O&M up 29% YoY; higher payroll, software, and planned outage costs drove segment NI down to $10.4M from $15.5M .
  • Warmer weather and higher O&M weighed on gas distribution: seasonal loss widened to $7.4M (vs. $5.0M), with Idaho particularly affected; some jurisdictions lack weather normalization/decoupling .
  • EPS miss vs consensus despite revenue beat: diluted EPS from continuing ops $0.07 vs $0.13* on expense headwinds; CFO noted inflation in insurance and payroll and pass‑through items obscuring optics .

Financial Results

Quarterly trend (oldest → newest)

Q2 2025 vs S&P Global consensus

Segment net income

Key KPIs

Notes: Estimate values marked with * retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We continued our solid start to 2025, despite weather and operating cost challenges that impacted the second quarter results.” — Nicole Kivisto, CEO .
• “We currently have 580 megawatts of data center load under signed electric service agreements…180 megawatts is currently online…100 megawatts expected…late this year…150 megawatts…2026…150 megawatts…2027.” — CEO .
• “We are narrowing our earnings per share guidance to a range of $0.88 to $0.95 per share from our previous range of $0.88 to $0.98 per share.” — CEO .
• “Pipeline [Q2] was very solid…higher transportation revenue due to the Wahpeton expansion and customer demand for short‑term contracts.” — CFO .
• On expense drivers and guidance: “Warmer than normal temperatures…higher operating expenses…insurance costs…payroll related costs…we don’t see those being as impactful [in H2]…we felt comfortable moving the top end back.” — CFO .

Q&A Highlights

• Bakken East and storage: Management views Baker Storage scaling as separate from Bakken East; state support and customer commitments are key; binding open season targeted within ~6+ months .
• Guidance bridge: About ~$1M Q2 weather impact; planned outage in plan; inflationary items (insurance, payroll) elevated in H1 but not expected to persist at same run‑rate in H2; pass‑through items (conservation/TSA) affect optics but revenue‑recovered .
• Data center capacity: Some pockets can be served capital‑light, but incremental load may require new transmission/generation; company will communicate as ESAs are signed .

Estimates Context

• Q2 2025 results vs S&P Global consensus: revenue beat ($351.2M vs $303.0M*) and EPS miss ($0.07 vs $0.126*); 4 EPS and 2 revenue estimates contributed to consensus .
• Q1 2025 context: revenue beat ($674.8M vs $653.1M*) and EPS beat ($0.40 vs $0.363*) .

Note: Estimate values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Near‑term: Expect EPS to track toward the mid/low end of the narrowed $0.88–$0.95 range absent unusual weather, with H2 relief as outage costs roll off and O&M inflation normalizes per management .
• Pipeline strength is durable: growth projects and short‑term capacity demand underpin earnings quality; Minot expansion (in service late 2025) and potential Bakken East are upside options .
• Electric demand from data centers is a structural tailwind; 580 MW ESAs provide multi‑year visibility, with capital‑light returns today and optionality to invest in T&D/generation as load scales .
• Regulatory cadence remains constructive; Badger Wind approvals (ADP/CPCN) and active GRCs support rate‑base growth and cost recovery, mitigating O&M inflation over time .
• Capital plan largely equity‑neutral in 2025; an ATM will be re‑established for out‑years—monitor dilution pacing versus 7–8% rate‑base growth and 6–8% EPS CAGR targets .
• Dividend growth resumed (to $0.14/qtr; 7.7% increase), consistent with a 60–70% payout framework, supporting total return while the data‑center/pipeline stories mature .

Appendix: Additional Detail

Selected consolidated P&L (Q2)

Capex outlook (net)