Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MDU Resources Group Inc (MDU, Financial) reported record second-quarter earnings in its pipeline segment, driven by unprecedented transportation volumes and increased storage revenues.
- The company is on track to complete the tax-free spin-off of its Construction Services business, Everus, later this year, with a strong management team in place to drive future growth.
- MDU Resources Group Inc (MDU) has a long-term guidance forecasting $2.7 billion of regulated capital investment, driving a 7% compound annual growth rate on its utility rate base.
- The utility business demonstrated solid results despite unfavorable weather, supported by strategic rate adjustments and infrastructure investments.
- Everus achieved record second-quarter earnings and an all-time record backlog, indicating strong future demand and growth potential.
Negative Points
- MDU Resources Group Inc (MDU) experienced a decrease in second-quarter earnings compared to the same period last year, with GAAP earnings dropping from $130.7 million to $60.4 million.
- The utility business faced challenges due to higher operation and maintenance expenses and cooler weather, negatively impacting electric volumes.
- The natural gas utility segment reported a seasonal loss, primarily due to higher operation and maintenance expenses and increased depreciation and amortization.
- Everus reported lower second-quarter revenues due to the timing of projects, impacting overall electrical and mechanical revenues.
- The company revised its revenue guidance for Everus downward, reflecting lower revenues experienced on a year-to-date basis.
Q & A Highlights
Q: Can you discuss the quality of the backlog being added at Everus and how it influences the margin profile going forward?
A: Jeffrey Thiede, President and CEO of Everus, explained that data center work is a significant part of the backlog, along with semiconductors and industrial work. The market remains competitive, but margins are comparable, and they aim for margin uplift through project execution and operational excellence.
Q: What is causing the timing delay for revenues at Everus, and is it targeted in specific segments or locations?
A: Jeffrey Thiede noted that the delays are primarily in the Electrical and Mechanical segments due to project timing, particularly in the commercial hospitality market in Las Vegas. However, significant projects are in preconstruction, and they are confident in their guidance ranges given the record backlog.
Q: How is Everus achieving a higher margin profile despite these timing issues?
A: Jeffrey Thiede attributed the higher margin profile to effective project execution, thorough planning, favorable weather, and supportive schedules, all contributing to favorable margins.
Q: Is the upcoming PJM workshop related to the Amazon ISA affecting the pace of Ohio data center growth?
A: Jeffrey Thiede stated that there has been no impact on their current and future workload in Ohio. They are strong in the market and have been growing rapidly.
Q: Does MDU plan to retain any equity stake in the potential SpinCo during the Everus spin-off?
A: Jason Vollmer, CFO, mentioned that they are maintaining flexibility regarding the equity stake. They aim to ensure both Everus and MDU Resources are strong post-spin, but no final decision has been made yet. Details will be disclosed in the Form 10 later this year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
