Energy and construction materials company MDU Resources (NYSE:MDU) announced better-than-expected revenue in Q1 CY2025, with sales up 14.7% year on year to $674.8 million. Its GAAP profit of $0.40 per share was 14.9% below analysts’ consensus estimates.
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MDU Resources (MDU) Q1 CY2025 Highlights:
- Revenue: $674.8 million vs analyst estimates of $653.1 million (14.7% year-on-year growth, 3.3% beat)
- EPS (GAAP): $0.40 vs analyst expectations of $0.47 (14.9% miss)
- EPS (GAAP) guidance for the full year is $0.93 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 16.9%, in line with the same quarter last year
- Market Capitalization: $3.44 billion
StockStory’s Take
MDU Resources’ first quarter performance was shaped by growth in its Pipeline and Natural Gas Distribution segments, with both units posting double-digit year-over-year earnings increases. CEO Nicole Kivisto highlighted a 1.4% rise in retail utility customers and higher natural gas volumes supported by colder weather as key drivers. The company also benefited from rate relief in multiple states for its natural gas business. However, higher operation and maintenance expenses, including costs related to electric generating station outages and increased payroll, offset these gains. Management was quick to credit the “dedication to our core strategy” for the quarter’s results, while also noting the incremental contribution from data center loads in the electric segment.
Looking ahead, MDU Resources’ full-year outlook is anchored by expected customer and rate base growth in its utility businesses and continued momentum in its pipeline segment. Management reaffirmed its focus on “operational excellence” and outlined plans for $3.1 billion in capital investments over the next five years. Kivisto stated, “We believe we are well-positioned for growth into the future with anticipated capital investment of $3.1 billion over the next five years, 7% to 8% compound annual utility rate base growth and customer growth expected in the 1% to 2% range annually.” The company also emphasized the impact of new infrastructure projects and pending regulatory approvals as key factors for future performance.
Key Insights from Management’s Remarks
MDU Resources attributed first quarter results to customer growth, recent rate relief, and increased demand from large energy users, while also flagging higher costs and regulatory developments.
- Data center load expansion: The electric segment saw a significant increase in retail electric volumes, largely driven by 180 megawatts of data center capacity coming online, with additional phases expected to ramp up over the next several years.
- Rate relief in gas segment: The natural gas distribution business benefited from new multi-year rate orders in Washington and interim rates in Montana, supporting higher retail sales revenue and offsetting some of the impact from increased operating expenses.
- Pipeline segment growth: The pipeline business posted record first quarter earnings, supported by strategic expansion projects and heightened demand for both transportation and storage services, particularly from industrial and power generation customers.
- Capital-light customer strategy: Management’s approach to serving large customers—especially data centers—utilized existing system capacity, minimizing the need for new capital expenditures and enabling immediate incremental earnings while sharing costs with retail customers.
- Wildfire and legislative developments: New wildfire prevention and liability limitation laws in three of MDU’s four electric states add a layer of risk mitigation, providing greater certainty for operations and future investments.
Drivers of Future Performance
MDU Resources’ management expects future performance to hinge on utility rate base growth, successful infrastructure investments, and customer additions, with regulatory and cost factors influencing results.
- Ongoing utility investment: The company plans $3.1 billion in capital investments over five years, targeting 7% to 8% annual utility rate base growth, which management expects will drive long-term earnings expansion and support its dividend policy.
- Pipeline development opportunities: MDU is advancing large pipeline projects, such as the Bakken East pipeline and Baker Storage Field expansion, but noted that these are contingent on customer commitments and regulatory approvals; management views these as potential incremental growth drivers not yet included in its capital plan.
- Regulatory and operational risks: Management cautioned that construction costs, tariffs, and timing of regulatory approvals could impact project economics and pace of execution. The company is also monitoring economic sensitivities in key service areas, including housing starts and industrial demand, which could influence customer growth.
Catalysts in Upcoming Quarters
Going forward, our analysts will monitor (1) the pace of infrastructure investments—especially for pipeline and electric capacity expansions, (2) regulatory outcomes for pending rate cases and major project approvals, and (3) incremental progress in signing new large commercial or data center customers. Additionally, updates on the Bakken East pipeline and responses to changing economic or legislative conditions will be critical to assess MDU’s growth trajectory.
MDU Resources currently trades at a forward P/E ratio of 16.2×. At this valuation, is it a buy or sell post earnings? Find out in our full research report (it’s free).
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