Otter Tail Corp (OTTR)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered softer results sequentially: revenue $303.1M (-3.6% YoY) and diluted EPS $1.30 (-5.1% YoY), as Plastics pricing declined and Manufacturing volumes weakened; Electric net income grew on interim ND rate increases and riders .
• 2025 diluted EPS guidance initiated at $5.68–$6.08; long-term EPS growth target raised to 6–8% and electric rate base CAGR updated to 9% (from 7.7%), underscoring utility-led earnings compounding .
• Regulatory and growth catalysts: ND rate case approval (+$13.1M net revenue requirement, 10.1% ROE); expanded solar plans (345 MW), wind repowering pacing, and MISO/JTIQ transmission pipeline .
• Board raised the quarterly dividend 12% to $0.525 (annual $2.10), reflecting confidence in cash generation amid normalization in Plastics .
• Wall Street consensus estimates (S&P Global) were unavailable at time of drafting; estimate comparisons are therefore omitted pending retrieval.

What Went Well and What Went Wrong

What Went Well

• Electric segment resilience: Q4 electric net income rose to $21.5M (+$4.5M YoY) on interim ND rate increases and rider revenues, with O&M cost discipline offsetting higher D&A/interest .
• Record year and capital plan: 2024 diluted EPS $7.17 with ROE 19.3%; five-year capital plan supports 9% rate base CAGR and raised long-term EPS growth target to 6–8% .
• Plastics volumes: Q4 Plastics volumes up 23% YoY; full-year Plastics net income reached $200.7M on strong distributor/end-market demand, aided by Vinyltech expansion to large-diameter pipe .

Selected quotes:

• “Otter Tail Corporation produced record earnings in 2024, generating diluted earnings per share of $7.17.”
• “Otter Tail Power continues to perform well, converting our 2024 rate base growth into earnings growth at approximately a 1:1 ratio.”
• “Our Plastics segment produced strong financial results, generating record earnings of $201 million.”

What Went Wrong

• Sequential compression: Q4 operating income fell to $66.8M (from $107.5M in Q3); Plastics net income dipped slightly YoY on lower prices and higher G&A, and Manufacturing swung to a -$0.6M loss on 25% volume declines .
• Price headwinds: PVC pipe prices declined ~11% YoY in Q4; management expects continued pricing retreat through 2025, normalizing Plastics earnings over time .
• Corporate costs: Q4 corporate net loss widened to -$5.0M on higher insurance claims and variable compensation .

Financial Results

Segment breakdown (Operating Revenues and Net Income, quarterly):

Selected KPIs (FY 2024):

Note: Wall Street consensus (S&P Global) estimates unavailable at time of drafting; estimate comparison omitted.

Guidance Changes

Segment EPS guidance composition (management detail):

Earnings Call Themes & Trends

Management Commentary

• Strategy and performance: “We increased our long-term earnings per share growth rate target to 6 to 8%… increasing our total shareholder return target to 9 to 11%.”
• Utility execution: “Otter Tail Power… obtained approval for our fully settled North Dakota general rate case… net annual revenue requirement increase of $13.1 million premised on a return on equity of 10.1 percent and an equity layer of 53.5 percent.”
• Plastics outlook: “Plastics segment earnings are forecasted to be $143,000,000 in 2025… we anticipate reaching [normal] $45,000,000–$50,000,000 in 2028.”
• Capital plan: “Otter Tail Power’s updated 5-year capital spending plan totals $1.4 billion and is expected to produce a rate base compounded annual growth rate of 9 percent.”
• Balance sheet and financing: “No equity needs for at least the next five years… retire $80 million parent debt in 2026 with cash.”

Q&A Highlights

• Large load agreements: No signed ESAs yet; 150 MW term sheets; potential signings targeted within 1–3 years; load-related CapEx not in base plan and would be incremental .
• Manufacturing mix and weakness: Metal fabrication remains majority; broad softness across RV, ag, construction; inventory overhang and interest-rate effects; import pressure returning as freight costs normalize .
• BTD Georgia expansion: Capacity supports up to ~$35M incremental annual sales; customers expanding in Southeast .
• Plastics pricing and margins: Persistent price declines; increased volumes mitigate; Vinyltech large-diameter capacity improves Southwest fulfillment and logistics .

Estimates Context

• Wall Street consensus (S&P Global Capital IQ) for Q4 2024 EPS and revenue was unavailable at the time of drafting due to access limitations. As a result, explicit beat/miss versus consensus cannot be determined here. Once available, we will update the comparison to reflect results versus “Primary EPS Consensus Mean” and “Revenue Consensus Mean” (S&P Global).

Key Takeaways for Investors

• Utility-led compounding intact: 9% rate base CAGR with constructive regulation and rider recovery supports long-term EPS growth of 6–8% post-Plastics normalization .
• Near-term earnings reset: 2025 EPS guide $5.68–$6.08 reflects Plastics price normalization and Manufacturing softness; Electric expected to grow ~7% on 12% average rate base increase .
• Capital deployment runway: Wind repowering, 345 MW solar adds, and MISO/JTIQ transmission pipelines provide multi-year investment visibility with limited retail rate impact from regional allocation .
• Cash returns durable: Raised dividend 12% to $2.10 annual; balance sheet liquidity $606M and no equity needs for ≥5 years underpin capital allocation flexibility .
• Plastics transition: Expect continued pricing retreat and margins compression; strategic capacity (Vinyltech) boosts regional service and volume resilience during normalization .
• Watch list for 2025: Execution on ND rate implementation, solar approvals, pace of large-load signings, PVC pricing trajectory, and Manufacturing end-market stabilization .
• Trading implications: Near-term prints likely hinge on Plastics pricing cadence and any large-load ESA announcements; medium-term thesis rests on utility capex-to-earnings conversion and regulated ROE durability .