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OT

Otter Tail Corp (OTTR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 EPS was $1.86, essentially in line with S&P Global consensus $1.87*, while revenue of $325.6M was modestly below the $331.3M consensus*; management raised full‑year EPS guidance to $6.32–$6.62 (midpoint +$0.21 to $6.47) and uplifted LT EPS CAGR target to 7–9% .
  • Utilities execution remained solid (higher volumes ex‑weather; rate case filed in Minnesota for ~$44.8M/17.7% increase), while Plastics outperformed internal expectations despite a 17% YoY price decline; Manufacturing volumes stayed soft but margins improved on cost actions .
  • Guidance increased primarily on stronger Plastics margins (lower resin costs) and better Electric results; company also lifted Electric five‑year rate base CAGR to 10% from 9% and introduced a $1.9B utility capex plan through 2030, with no external equity needs through at least 2030 .
  • Potential stock catalysts: Minnesota rate case trajectory, execution on 155 MW large load onboarding, Plastics margin normalization pace, and regulatory progress on MISO Tranche projects; DOJ intervention in PVC pipe civil litigation pauses discovery but adds legal overhang .

What Went Well and What Went Wrong

  • What Went Well

    • Raised FY25 EPS guidance to $6.32–$6.62 (from $6.06–$6.46) on stronger Plastics and better Electric volumes; management also lifted LT EPS CAGR target to 7–9% and Electric rate base CAGR to 10% .
    • Plastics outperformed internal expectations despite lower prices, benefiting from 16% lower input costs and 4% higher volumes from added capacity; quote: “Plastic segment earnings exceeded our expectation for the third quarter…” .
    • Strong balance sheet ($325.8M cash; total liquidity $705.3M) supports $1.9B utility investment plan with no external equity; CFO: “positioned well to fund … growth plan without the need for external equity through at least 2030” .

  • What Went Wrong

    • Consolidated revenue declined YoY ($325.6M vs. $338.0M) and missed consensus; EPS declined YoY (to $1.86 from $2.03) on lower Plastics pricing, though in line with consensus* [*S&P Global].
    • Electric faced unfavorable weather and North Dakota seasonal rate timing effects; net income down $1.2M YoY despite higher volumes ex‑weather .
    • Manufacturing continued demand headwinds (volumes −8% YoY), even as margins improved; management still expects a low‑demand environment through most of 2026 .

Financial Results

Consolidated results vs prior periods and consensus

MetricQ3 2024Q2 2025Q3 2025Consensus (Q3 2025)
Revenue ($M)$338.0 $333.0 $325.6 $331.3*
Operating Income ($M)$107.5 $97.5 $96.6 —
Net Income ($M)$85.5 $77.7 $78.3 —
Diluted EPS ($)$2.03 $1.85 $1.86 $1.87*
Operating Margin (%)31.8% (calc. from above) 29.3% (calc. from above) 29.7% (calc. from above) —

Notes: Consensus values marked with an asterisk are from S&P Global; Values retrieved from S&P Global.

Segment breakdown (Q3 2025 vs Q3 2024)

SegmentOperating Revenue Q3 2024 ($000s)Operating Revenue Q3 2025 ($000s)Net Income Q3 2024 ($000s)Net Income Q3 2025 ($000s)
Electric130,380 138,597 28,530 27,308
Manufacturing79,896 76,951 2,174 3,916
Plastics127,757 110,015 54,479 43,495
Corporate——296 3,573
Total338,033 325,563 85,479 78,292

KPIs and operating drivers (Q3 2025 vs Q3 2024)

KPIQ3 2024Q3 2025Commentary
Retail MWh Sales (Electric)1,304,446 1,373,054 Volumes up 5.3% ex‑weather; weather unfavorable YoY .
Degree Days vs Normal (Electric)HDD 4.7%, CDD 111.5% HDD 61.0%, CDD 93.1% Mix impacted revenues; weather EPS effect −$0.02 vs PY, −$0.01 vs normal .
Plastics price change YoY—−17% Ongoing normalization from 2022 peak .
Plastics volume change YoY—+4% New Vinyltech capacity aided volumes .
Plastics input costs YoY—−16% Lower PVC resin, other inputs .
Manufacturing volume change YoY—−8% Broad end‑market softness; steel +3% pass‑through .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Diluted EPSFY 2025$6.06–$6.46 (8/4/2025) $6.32–$6.62 (11/3/2025) Raised and narrowed
Electric EPSFY 2025$2.29–$2.35 (8/4/2025) $2.31–$2.35 (11/3/2025) Midpoint up, narrowed
Manufacturing EPSFY 2025$0.21–$0.27 (8/4/2025) $0.22–$0.26 (11/3/2025) Range narrowed
Plastics EPSFY 2025$3.64–$3.88 (8/4/2025) $3.86–$4.05 (11/3/2025) Raised and narrowed
Corporate EPSFY 2025$(0.08)–$(0.04) (8/4/2025) $(0.07)–$(0.04) (11/3/2025) Range narrowed
Return on EquityFY 202514.5%–15.3% (8/4/2025) 15.1%–15.7% (11/3/2025) Raised
Long‑term EPS growth targetLT6%–8% (prior) 7%–9% Raised
Electric rate base CAGR5‑yr9% (prior) 10% Raised
MN Rate Case (net rev incr.)MN filing—~$44.8M (17.7%) requested; interim ~12.6% from 1/1/2026 if approved New filing
DividendQuarterly$0.525 declared Aug 4, 2025 $0.525 declared Nov 3, 2025, payable Dec 10, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Rate cases/regulatoryND case finalized (constructive); SD filing targeted mid‑2025; evaluating MN filing late 2025 . Q2: SD rate case filed; solar project cost recovery approval .MN PUC filing ~$44.8M/17.7% net increase; SD case progressing; interim SD rates start Dec 1, 2025 .Increasing regulatory activity; constructive recovery focus.
Large load additionsExecuted 155 MW service agreement (target late 2025 in‑service), comprised of ~3 MW firm, ~152 MW non‑firm .155 MW load to come online in weeks; expected to aid earnings next year; structured as interruptible/non‑firm to limit capacity needs .Near‑term onboarding; earnings contribution 2026+ with cost spreading.
Plastics normalizationPrices down 11% YoY; volumes +13%; normalization to pre‑2021 margins by 2028 .Prices −17% YoY; input costs −16%; volumes +4%; still above internal expectations; LT normalization reiterated .Continuing price normalization offset by lower resin; guidance raised.
Tariffs/IRA policyMonitoring tariffs; domestic sourcing limits exposure; IRA credits supportive; transferability not needed near‑term .Continued monitoring; no material change; focus on renewable tax credits aiding rate impact .Stable; watch policy risk.
Transmission/MISO projectsMISO Tranche 1 & 2.1 development; some local resistance; FOFR filings .Tranche 1 siting resistance delays possible; FERC complaint on Tranche 2.1; still expect to proceed for reliability .Some timing risk; long‑term need intact.
Manufacturing demandBroad end‑market softness; managing costs; BTD Georgia expansion ramping . Q2: volumes −9% YoY .Headwinds persist; some stabilization; outlook soft through most of 2026 .Prolonged trough; cost actions sustaining margins.
Legal/regulatory (PVC litigation)—DOJ intervened to stay civil discovery; motion to dismiss filed; potential decision in 2026 .Added legal overhang; low near‑term P&L impact disclosed.

Management Commentary

  • “We are pleased with our third quarter financial results… we are increasing and tightening our 2025 diluted earnings per share guidance to a range of $6.32 to $6.62 from $6.06 to $6.46.” — Chuck MacFarlane, CEO .
  • “Our electric segment’s revised five‑year capital spending plan increased by approximately 35% and now totals $1.9 billion… we expect to finance our growth without any equity issuances.” — Todd Wahlund, CFO .
  • “Plastic segment earnings exceeded our expectation for the third quarter, even as we continue to progress towards a more normalized earnings level.” — Todd Wahlund, CFO .
  • “We filed a request with the Minnesota Public Utilities Commission to increase our rates by approximately $44.8 million, or 17.7 percent.” — Chuck MacFarlane, CEO .

Q&A Highlights

  • Estimate cadence and LT growth: Management reiterated LT EPS growth of 7–9% post‑2028 as Plastics normalizes and Manufacturing recovers; year‑to‑year fluctuations expected based on utility recovery timing and non‑utility cycles .
  • Cash allocation: Priority is funding the utility growth plan and sustaining the dividend; potential opportunistic M&A or shareholder returns secondary; no external equity expected .
  • Large load contract: 155 MW primarily non‑firm/interruptible, minimal capacity/interconnection needs; modest near‑term earnings but helps spread fixed costs .
  • Legal update: DOJ intervened to stay discovery in PVC civil litigation; motion to dismiss filed; no set court deadline, decision anticipated in 2026 .

Estimates Context

  • Q3 2025 vs S&P Global consensus: EPS $1.86 vs $1.87* (in line), Revenue $325.6M vs $331.3M* (slight miss); # of estimates: EPS (3), Revenue (2) .
  • FY 2025 consensus: EPS $6.53*, Revenue $1.3146B*; current guidance $6.32–$6.62 suggests midpoint ($6.47) slightly below EPS consensus .
    Notes: Consensus values marked with an asterisk are from S&P Global; Values retrieved from S&P Global.

Consensus snapshot

MetricQ3 2025FY 2025
EPS Consensus Mean$1.87*$6.53*
Revenue Consensus Mean$331.3M*$1.3146B*
# of Estimates (EPS/Rev)3 / 2*—

Key Takeaways for Investors

  • Guidance momentum: FY25 EPS raised and narrowed; LT EPS growth target lifted to 7–9% with a utility‑led plan (10% rate base CAGR) and no external equity through at least 2030—a constructive setup for multiple support .
  • Plastics normalization: Pricing declines continued (−17% YoY), but lower resin costs and added capacity buoyed margins and volumes; watch the pace of normalization against guidance, DOJ litigation headlines, and 2026 demand .
  • Utility catalysts: MN rate case (17.7% net increase request) and SD case progress are near‑term regulatory drivers; execution on MISO projects and renewables/tax credit monetization can temper customer bill impacts .
  • Large load onboarding: 155 MW load should start contributing in 2026 without major capacity spend; tone suggests more pipeline opportunities, but earnings ramp likely measured .
  • Manufacturing trough: Cost alignment improved margins despite volumes −8%; management sees low demand through most of 2026—upside as cycle turns, but timing uncertain .
  • Balance sheet strength: $705M liquidity and $326M cash underpin self‑funded growth; dividend maintained at $0.525 and could remain a steady return component .
  • Trading setup: Revenue modestly missed consensus while EPS was in line; the narrative hinges on regulatory execution, Plastics margin trajectory, and visibility into 2026–2027 normalization path .

Additional data and disclosures

  • Full consolidated statements and segment results (including 9M cash flow, capex and liquidity) are in the Q3 2025 8‑K 2.02 and Exhibit 99.1 .
  • Prior quarters for trend analysis: Q2 2025 and Q1 2025 earnings materials, including segment and consolidated statements and dividends .