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MDU Resources' (MDU) Arm Acquires McMurry Ready-Mix's Assets

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MDU Resources Group, Inc.’s (MDU - Free Report) construction materials unit Knife River Corporation recently acquired assets of Casper, Wyoming-based aggregates and concrete supplier McMurry Ready-Mix Co. The deal will expand the subsidiary’s footprint in the Intermountain Region, which includes Cheyenne and Laramie as well as locations throughout Montana and Idaho.

Details & Benefits of the Deal

The financial details of the transaction are left undisclosed. The aggregate operations of McMurry will now fall under Knife River Materials with the ready-mix plant and employees joining the company unit’s existing construction operations in Casper. With this collaboration, the combined entity will continue to focus on supplying third-party customers along with retaining Knife River's own operations.

The aggregate reserves of McMurry are estimated to be nearly 100 million tons. These are advantageously located across central Wyoming include along the interstates 25 and 80 alongside the presence of a ready-mix plant on the west side of Casper. These will benefit Knife River's east Casper location.

Capital Investment Plans

The capital expenditure of MDU Resources in the first nine months of 2020 was $413.8 million while the forecast for the full year is pegged at $626 million. Moreover, on Nov 20, MDU Resources announced a $3-billion capital budget plan for the next five years from 2021 through 2025, which is properly distributed among the two platforms, namely the regulated energy delivery, and the construction materials and services platforms. The company will invest $2,112 million and $919 million, respectively, in these platforms during the above-mentioned time frame.

These investments will be aimed at enhancing the reliability of the company’s services and enable it to serve an increasing customer base effectively. MDU Resources anticipates the electric and natural gas utility to see a CAGR of 5%. Also, the utility expects its customer base to expand 1.5% annually.

On the construction materials and services platform, the company will target organic growth and make opportunistic acquisitions, which will supplement its existing operations and boost earnings. Remarkably, this marks Knife River's seventh buyout in the last three years.

Other gas distribution utilities are also expanding their operations on the back of strategic capital investment plans. These include National Fuel Gas Company (NFG - Free Report) and Atmos Energy Corporation (ATO - Free Report) . National Fuel Gas Company increased its consolidated capital expenditure projection for fiscal 2021 to $720-$830 million from the prior guidance of $660-$770 million.

Atmos Energy is planning to invest in the $11-$12 billion range from fiscal 2021 to 2025, of which 80% will be allocated to enhance the safety of its existing businesses. These planned investments will result in 6-8% annual earnings growth over the same time frame.

Zacks Rank & Key Pick

MDU Resources currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock in the same sector is Pinnacle West Capital Corporation (PNW - Free Report) , which is carrying a Zacks Rank #2 (Buy), currently. The company delivered a trailing four-quarter earnings surprise of 27.15%, on average. Also, it has a long-term (three-five years) earnings growth rate of 3.59%.

Price Performance

In the past six months, shares of the utility have gained 21.3%, outperforming the industry’s 4.4% growth.

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