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MDU Resources' (MDU) Sweetman Acquisition to Expand Business

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MDU Resources Group, Inc. (MDU - Free Report) announced the acquisition of Sioux Falls, SD-based Sweetman Const. Co., which will be integrated in MDU Resources’ construction materials subsidiary Knife River Corporation. The company expects this acquisition to expand the construction materials business and drive earnings in the long run. Sweetman is a premier provider of aggregates, asphalt as well as ready-mix concrete and operates as Concrete Materials Company.

Strategic Acquisitions

The company is making strategic acquisitions to expand the operation of the construction materials subsidiary, Knife River Corporation. Since April 2018, this is the fourth deal aimed toward the same purpose.

In April 2018, the company acquired Teevin & Fischer. In June, it acquired Little Falls, MN-based Tri-City Paving. In July, the company acquired the operations of Molalla Redi-Mix and Rock Products, Inc., which produces ready-mix concrete in Molalla, Oregon and south of Portland. All the acquisitions contributed to the expansion of Knife River Corporation’s portfolio.

In the second quarter of 2018, the Construction Materials business contributed 47.8% to the company’s total revenues. We expect the acquisitions to further boost the earnings and revenues from the Construction material business.

Long-Term Plans

MDU Resources’ decision to expand the construction materials business through acquisitions bodes well, given improving demand for construction materials. Ongoing U.S. economy improvement is resulting in new construction for residential and commercial purposes. In addition, destruction caused by hurricanes, flood and wildfires will also call for new building and renovations, which is driving demand for construction materials.

The company forecasts capital expenditure plan of $2,367 million for the 2018-2022 periods, of which 22.5% is expected to be allocated toward construction materials and services segment. This is likely to boost the Construction material business in the upcoming quarters.

Price Performance

In the past three months, the company’s shares have lost 12.8% compared with the industry’s decline of 2.2%.


 

Zacks Rank & Key Picks

MDU Resources currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same industry are Southwest Gas Corp. (SWX - Free Report) , Atmos Energy Corp. (ATO - Free Report) and New Jersey Resources Corp. (NJR - Free Report) . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Southwest Gas reported an average positive earnings surprise of 24.17% in the last four quarters. Its expected EPS growth for the next 3-5 years is pegged at 4.0%

Atmos Energy reported an average positive earnings surprise of 6.29% in the trailing four quarters. Its expected EPS growth for the next 3-5 years is pegged at 6.50%

New Jersey Resources reported an average positive earnings surprise of 72.16% in the last four quarters. Its expected EPS growth for the next 3-5 years is pegged at 7.0%

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