Otter Tail Q3 2022 Earnings Report
Key Takeaways
Otter Tail Corporation reported exceptional financial results for Q3 2022, driven by its diversified business model. Each operating segment contributed to double-digit earnings growth, with the Plastics segment being a significant contributor. The company is adjusting its 2022 diluted earnings per share guidance due to resin price reductions impacting the Plastics segment.
Consolidated operating revenues increased 21% to $384 million.
Consolidated net income increased 60% to $84 million.
Diluted earnings per share increased 60% to $2.01 per share.
MISO approved several projects within its long-range transmission plan involving Otter Tail Power.
Otter Tail
Otter Tail
Otter Tail Revenue by Segment
Forward Guidance
The company is lowering its 2022 diluted earnings per share guidance to a range of $6.42 to $6.72, primarily driven by expected sales volume reductions in the Plastics segment due to declining PVC resin prices. The midpoint of the revised guidance represents a 55% growth rate from 2021.
Positive Outlook
- Increased sales volumes from commercial and industrial customers and improved margins from favorable pricing in the Electric segment.
- Lower than anticipated labor and non-labor operating and maintenance costs in the Electric segment.
- Increased sales volumes at BTD driven by end market demand in the Manufacturing segment.
- Increased earnings from T.O. Plastics driven by customer demand and improved gross profit margins due to the availability of low-cost raw material inputs and improved manufacturing productivity.
- Anticipate sale prices for PVC pipe will remain elevated for the remainder of 2022.
Challenges Ahead
- Reduced demand for PVC pipe in the fourth quarter of 2022 due to anticipated further declines in PVC resin prices resulting in reduced purchase volumes from distributors and contractors.
- Potential for continued decline of resin prices and reduced sales volumes could put downward pressure on sales prices for the remainder of 2022 and into 2023.
- Finished goods inventory levels have started to increase as the availability of resin, additives and other ingredients used to manufacture PVC pipe has improved.
- Investment losses on corporate-owned life insurance policies and other investments during the third quarter of 2022.
- Expected increase in health insurance costs in the self-insured health plan due to higher claims experience.
Revenue & Expenses
Visualization of income flow from segment revenue to net income