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MR

MDU RESOURCES GROUP INC (MDU)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered solid regulated results: operating revenues rose to $535.5M and income from continuing operations was $70.5M ($0.34 diluted EPS from continuing ops), with pipeline segment net income up 14% YoY to $20.5M on stronger transportation and storage demand .
  • Management initiated 2025 diluted EPS guidance of $0.88–$0.98 and a $533M 2025 capex plan; long-term targets include 7%–8% utility rate base CAGR and 6%–8% EPS CAGR with a 60%–70% dividend payout ratio .
  • Data center load under signed agreements totals 580 MW (180 MW online), expected to ramp through 2025; Washington gas multi-year rate settlement targeted to be effective in March 2025 provides partial-year benefit—key near-term catalysts .
  • Equity issuance stance clarified: “no near-term equity” and none expected in 2025; potential issuance in 2026 to facilitate growth projects; 2024 benefited from nonrecurring items that will not repeat, implying a modest rebasing into 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Pipeline delivered record annual earnings (+45% YoY to $68.0M) and higher Q4 net income (+14% YoY to $20.5M) driven by new capacity, strong storage demand, and favorable rate resets; CEO: “Our pipeline segment again achieved record earnings... driven by record transportation volumes and increased storage revenue” .
    • Electric utility grew full-year net income to $74.8M (+4%) on rate relief across ND, SD, MT; Q4 retail sales revenue increased despite lower investment returns and higher O&M .
    • Retail customer base growth (~1.4%) and data center agreements (580 MW signed, 180 MW online) establish multi-year load growth with capital-light economics enhancing ROE and customer bill credits .

  • What Went Wrong

    • Natural gas distribution Q4 net income declined slightly to $29.4M (from $30.5M) on higher O&M and depreciation; full-year net income fell to $46.9M (from $48.5M) despite rate relief .
    • Elevated O&M and D&A across segments (utility and pipeline) as assets were placed in service; Q4 consolidated O&M rose to $105.7M vs $99.9M YoY .
    • Nonrecurring income items in 2024 (customer settlement, state tax rate effects) and dis-synergies post Everus spin reduce carryover into 2025 (CFO quantified ~$0.04 combined impact), necessitating guidance rebasing .

Financial Results

  • Consolidated Results (YoY and QoQ)
MetricQ4 2023Q3 2024Q4 2024
Operating revenues ($M)$499.9 $1,000.8 $535.5
Income from continuing operations ($M)$136.2 $62.2 $70.5
Net income ($M)$170.7 $64.6 $55.2
Diluted EPS (total)$0.84 $0.32 $0.27
Diluted EPS – continuing ops$0.67 $0.31 $0.34
  • Segment Net Income (YoY and QoQ)
Segment Net Income ($M)Q4 2023Q3 2024Q4 2024
Electric$17.7 $24.3 $17.1
Natural Gas Distribution$30.5 $(17.5) $29.4
Pipeline$18.0 $15.1 $20.5
  • KPIs and Operating Statistics
KPIQ4 2023Q3 2024Q4 2024
Pipeline transportation volumes (MMdk)148.0 155.1 149.7
Pipeline customer storage balance end of period (MMdk)37.7 54.6 44.1
Electric retail volumes (million kWh)1,179.8 1,166.7 1,157.3
Natural gas total throughput (MMdk)92.7 53.7 93.0
Average cost of natural gas per dk ($/dk)$5.65 $6.91 $6.04
Data center electric load under agreements (MW)—580 (180 online) 580 (180 online)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Diluted EPSFY 2025N/A$0.88 – $0.98 New
Total Capex ($M)FY 2025$532 $533 Raised $1M
Electric Capex ($M)FY 2025$154 $154 Maintained
Natural Gas Capex ($M)FY 2025$301 $310 Raised
Pipeline Capex ($M)FY 2025$77 $69 Lowered
Utility Rate Base CAGRLT~7% 7%–8% Raised range
EPS CAGRLT (rebased off 2025)6%–8% 6%–8% Maintained; rebased
Dividend Payout TargetLT60%–70% 60%–70% Maintained
Equity IssuanceNear-termNo equity until 2027 (prior stance) No near-term equity; none expected in 2025; potential in 2026 Clarified timing

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
Pipeline storage & volumesRecord Q2 earnings; strong storage; new rates effective Aug’23; Line Section 28 placed in service Record Q3 earnings; storage stronger than expected; continued rate benefits Q4 pipeline NI +14% YoY; record annual results; storage revenue +$7.1M in 2024 Strengthening; tailwind
Data center load & utility strategy455 MW signed (180 online); capital-light model benefits ROE and customer bills 580 MW signed (180 online); ramp over next few years 580 MW signed; timing of ramp impacts 2025 guidance range Expanding/contracts signed; ramp underway
Regulatory actionsFiled MT gas case; SD rate settlements pending; ND ESA 225 MW approved ND gas settlement filed; SD electric & gas settlements approved; WY gas case filed ND PSC settlement approved; WA negotiated settlement filed; MT interim granted; WY gas case filed Active; incremental revenue
Equity issuance outlook“No equity until 2027” Updated capital forecast in Nov implied potential earlier needs “No near-term equity”; none in 2025, potential in 2026 Timing pulled forward modestly
Spin-offs and structureEverus spin targeted late 2024; Knife River prior Everus completed Oct 31; focus on pure-play regulated Post-spin dis-synergies factored; rebasing EPS off 2025 Structure stabilized

Management Commentary

  • CEO: “Twenty twenty four was truly a transformational year… We have reached our stated goal of becoming a pure play regulated energy delivery business… Our pipeline segment again achieved record earnings… Electric segment also experienced earnings growth… data center opportunities including the 580 megawatts of data center load under signed electric service agreements” .
  • CEO: “We are initiating 2025 earnings per share guidance in the range of $0.88 to $0.98 per share… capital investment of $3.1 billion over the next five years… 7% to 8% utility rate base growth… long term EPS growth of 6% to 8%” .
  • CFO: “Adjusted income from continuing operations for 2024 was $184.4 million or $0.90 per share, a 22% increase vs 2023… Total earnings impact from data center loads in 2024 was approximately $3 million” .
  • CFO on guidance bridge: “In total, we’re talking about a $0.04 kind of change… ~$0.02 in 2024 related to nonrecurring items and a couple of cents in 2025 related to the dis-synergy items” .

Q&A Highlights

  • Equity issuance timing: Clarified “no near-term equity”; none expected in 2025; some likely in 2026 to facilitate growth projects given increased capital in 2026 .
  • Guidance sensitivities: Upside from continued strong storage margins, normal weather, O&M containment, and timing of data center ramp; WA rates expected to take effect in March—partial-year benefit .
  • Bakken East potential: Open season complete; pleased with interest; next steps to convert to binding commitments; project would be incremental to current 5-year plan; sizing depends on customer commitments .

Estimates Context

  • Wall Street consensus EPS and revenue for Q4 2024 were unavailable at time of analysis due to SPGI daily limit errors; we attempted retrieval but could not access estimates. As a result, we cannot quantify beat/miss versus consensus at this time [GetEstimates errors].
  • Implication: Focus near-term on qualitative drivers; we will reassess estimates once SPGI access resumes.

Key Takeaways for Investors

  • Regulated momentum intact: Rate relief, customer growth, and multi-year data center load ramp underpin 2025–2029 capital plan; pipeline strength continues to diversify earnings base .
  • Pipeline outperformance likely moderates: 2024 storage tailwinds and nonrecurring items (~$0.02 EPS effect) won’t repeat; 2025 EPS rebased accordingly; watch storage spreads and further capacity adds .
  • Capex mix shift: 2025 plan nudged higher ($533M); natural gas capex increased, pipeline trimmed—aligns with regulatory settlements and near-term projects .
  • Regulatory catalysts: WA multi-year settlement effective March 2025, MT interim relief effective Feb 2025, ND settlement effective Dec 2024—these support revenue normalization through 2025 .
  • Equity stance: No issuance in 2025; potential in 2026 to fund growth—low near-term dilution risk; monitor capital forecast updates .
  • Data center narrative: 580 MW signed, 180 MW online; timing of remaining ramps is a key swing factor for 2025; capital-light structure supports returns and customer bill benefits .
  • Post-spin clarity: Pure-play regulated profile with EPS CAGR 6%–8% (rebased off 2025) and dividend payout 60%–70%—supports defensive quality and income thesis .

Appendix: Additional Financial Detail (Q4 2024)

  • Consolidated operating expenses: $441.0M; O&M $105.7M; purchased gas $223.8M; electric fuel and purchased power $32.2M; D&A $50.8M; taxes other than income $28.5M .
  • Cash flow: FY 2024 CFO $502.3M; capex $528M; ending cash $66.9M .
  • Balance sheet highlights (12/31/24): Total assets $7,039M; total equity $2,691M; total debt $2,293M; equity/debt capitalization 54%/46% .