MDU

MDU Resource Group Offering: MDU Resource Group, Inc. has announced a public offering of $200 million in equity shares, with the potential for an additional $30 million, to fund general business purposes including debt repayment and capital expenditures, while avoiding increasing its debt burden.

Impact on Earnings: The increase in shares outstanding will dilute earnings per share, adding to the existing 205.3 million shares, despite MDU's anticipated long-term EPS growth rate of 6-8% and a customer growth rate of 1-2% annually.

Industry Comparisons: MDU currently holds a Zacks Rank #5 (Strong Sell), while Atmos Energy Corporation, a competitor, has a better Zacks Rank #2 (Buy) and a long-term earnings growth rate of 7.98%.

Investment Strategies: Other companies like Sempra Energy and ONE Gas, Inc. are also focusing on capital investments and reducing reliance on equity funding, with Sempra selling non-core assets to support core U.S. growth and ONE Gas planning a $4 billion investment through 2029.

Recent Stock Performance: MDU Resources Group has experienced a 10% pullback in share price over the past week, despite a 19% increase over the last three months and ongoing earnings growth.

Valuation Insights: The stock is currently trading at $19.26, below the narrative fair value of $20.50, raising questions about whether it is undervalued or if future growth is already priced in.

Growth Potential: MDU is well-positioned to benefit from significant investments in U.S. infrastructure, particularly in pipeline expansions and energy needs, which could lead to substantial revenue and earnings growth.

Investment Risks: The stock trades at a higher price-to-earnings ratio compared to its peers, indicating limited margin for error if growth falters, and potential risks include faster clean energy adoption and persistent cost inflation.