Back to top

Image: Bigstock

Reasons to Add Otter Tail (OTTR) to Your Portfolio Right Now

Read MoreHide Full Article

Otter Tail Corporation (OTTR - Free Report) provides attractive investment opportunities in the utility space, given its two-platform business model that consists of Electric and Manufacturing units. OTTR is enhancing shareholder value through its high-performing, low-cost electric utility and disciplined manufacturing companies.

Let’s focus on the factors that make this presently Zacks Rank #1 (Strong Buy) stock a strong investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Growth Projections & Surprise History

The Zacks Consensus Estimate for 2022 and 2023 earnings per share is pegged at $5.37 and $3.81, respectively. Earnings estimates for 2022 and 2023 have moved up 37.7% and 8.5%, respectively, in the past 60 days.

The Zacks Consensus Estimate for 2022 revenues is pegged at $1.37 billion, suggesting an increase of 14.6% from the year-ago reported figure.

Otter Tail’s trailing four-quarter earnings surprise is 36.9%, on average.

Debt Position

OTTR's total debt-to-total capital ratio is 41.2 compared with the industry average of 53. This indicates that OTTR is managing the business far more efficiently than peers in the same space.

Its times interest earned ratio at the end of first-quarter 2022 was 8.2, up 160 basis points from the 2021-end level. The strong ratio is indicative of Otter Tail’s ability to meet its debt obligations in the near future without any difficulties.

Return on Equity & Dividend Yield

Return on Equity (ROE) indicates how efficiently a company is utilizing its shareholders’ funds to generate returns. At present, its ROE is 22.4%, higher than the industry average of 10.4%.

Currently, OTTR has a dividend yield of 2.54% compared with the Zacks S&P 500 composite’s 1.72%.

Investments & Emission Reduction

Otter Tail makes consistent investments to upgrade and maintain the existing infrastructure for providing 24x7 reliable services to the customer base. OTTR has plans to invest $978 million in the 2022-2026 time period in electric, manufacturing and plastics segments.

Nearly 46% of the planned expenditure will be utilized for adding renewable and natural gas sources to its portfolio, while another 31% will be used for adding as well as enhancing electric transmission and distribution lines. The ongoing investments and planned capital expenditure will assist OTTR in making its systems clean, and provide affordable and reliable services to its customers.

Focused investment in cleaner sources of energy to produce electricity is expected to reduce carbon emissions from generation units by 50% within 2025 from the 2005 levels. Otter Tail also aims to lower emissions from generation units by nearly 97% within 2050 from 2005 levels.

Price Performance

In the past 12 months, Otter Tail’s shares have gained 35.7% compared with the industry’s growth of 5.5%.


Zacks Investment Research
Image Source: Zacks Investment Research

Other Stocks to Consider

Other top-ranked stocks in the same sector include American Electric Power (AEP - Free Report) , South Jersey Industries (SJI - Free Report) and WEC Energy Group (WEC - Free Report) , each currently holding a Zacks Rank #2 (Buy).

American Electric Power, South Jersey Industries and WEC Energy delivered an earnings surprise of 2.4%, 101.5% and 8.6%, respectively, on average.

The Zacks Consensus Estimate for 2022 earnings for American Electric Power, South Jersey Industries and WEC suggests growth of 5.3%, 4.3% and 6.3%, respectively, from the corresponding year-earlier reported numbers.