Is MDU Resources (MDU) Worth Adding To Your Portfolio?

On Jun 17, Zacks Investment Research upgraded MDU Resources Group Inc. (NYSE:MDU) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

MDU Resources has been witnessing rising earnings estimates on the back of strong first-quarter 2016 results. This electric and natural gas utility reported earnings of 17 cents, resulting in a positive earnings surprise of 30.77%, in the first quarter of 2016. The company reported a loss of $1.57 per share in the year ago quarter. The long-term earnings growth is pegged at 7.0%.

The company’s consistent investments in operation and infrastructure have been a tailwind. MDU Resources is currently benefiting from its past investments and has further plans to invest over $1.5 billion in the next five years. This is expected to drive compounded earnings growth of 7% annually over that period.

The company has in the meantime expanded its customer base to 1.5 million. It further aims to grow its customers base by 1.5% to 2% annually.

MDU Resources’ construction business is also sustaining the momentum gathered in 2015. The company exited first-quarter 2016 with a combined construction business (materials $0.83 billion and services $0.53 billion) backlog of nearly $1.36 billion, up 38% year over year.

The current debt–to-capital ratio of the company is 42.2%, lower than the industry average of 45.81%. In addition, MDU Resources’ current ratio of 1.39 makes it an all season utility having the ability to survive with or without a rate hike. The current dividend yield of the company is 3.28%, much better than the utility sector average of 2.97%

The Zacks Consensus Estimate for 2016 moved up 4.7% to $1.12 per share as 50% of the estimates were revised higher over the last 60 days. For 2017, 50% estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 6.4% to $1.33 per share.

Other Stocks on the Horizon

Apart from MDU Resources Group, Clean Energy Fuels Corp. (NASDAQ:CLNE) , Spark Energy, Inc. (NASDAQ:SPKE) and Avangrid, Inc. (NYSE:AGR) sport a Zacks Rank#1 (Strong Buy).

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