Otter Tail Corporation

Adjusted diluted EPS in Q2 was $1.66, down 10% from $1.85 a year ago. The expected decline was primarily from Plastics, while corporate costs were also higher. The company recorded legal settlement charges of $1.84 per share in the quarter, excluded from adjusted results. Segment details: Electric earnings decreased slightly year over year; Manufacturing earnings increased $0.03 per share, or 38%; and adjusted Plastics earnings decreased $0.14 per share, or 11%. On the balance sheet, equity was 60% of total capital, with over $600 million of available liquidity including $278 million of cash and cash equivalents. For 2026, management raised adjusted EPS guidance to $5.68-$6.08, maintained Electric guidance for 14% earnings growth, increased Manufacturing guidance, and increased Plastics guidance while now expecting PVC average sales price to decline about 15% for the year. Management also reiterated the 5-year capital investment plan and said the $1.9 billion Otter Tail Power investment plan remains the main growth driver. The $103.5 million PVC settlement was paid into escrow by the end of July, with $73 million reflected as restricted cash at June 30 and the remaining $30 million paid after quarter-end.

Chuck MacFarlane said the quarter showed progress on strategic priorities across the utility and industrial businesses. He emphasized regulatory milestones at Otter Tail Power, including route permits for two major transmission projects and the filing of the 15-year Minnesota IRP, while stressing the company’s focus on low-cost, reliable service and disciplined execution. On Plastics, he said the company benefited from additional capacity and stronger volumes, and that settling the antitrust litigation was in shareholders’ best interest because it removed uncertainty, distraction, and legal cost.

Tyler Nelson highlighted that Q2 adjusted EPS of $1.66 was below last year because Plastics earnings were lower and corporate costs rose. He cited Electric support from higher rates, timely rate base recovery, and stronger commercial and industrial volumes, while noting higher O&M from a coal outage, vegetation management timing, and labor costs. He also pointed to balance sheet strength with 60% equity capitalization, more than $600 million of liquidity, and $278 million of cash, and said the company expects to fund its growth plan without external equity. For guidance, he said Manufacturing and Plastics assumptions were both raised, corporate costs are now expected to be higher, and the company continues to expect to retire $80 million of parent-level debt in the fourth quarter without replacing it.

Analysts focused on the Manufacturing margin outlook, PVC settlement implications, large-load demand, and the timing of IRP-related capital spending. Management said the Manufacturing business is currently tracking around a 5% net income return in the first half and still has room to improve through volume leverage and productivity, and confirmed Georgia capacity still has room to grow. On PVC, management said the settlement does not change pricing or customer relationships and declined to estimate what historical earnings would have been absent the settlement. On the large-load pipeline, management said additions are being driven by data centers, clean fuels, and thermal storage, and that the IRP’s natural gas generation opportunity is incremental to the previously identified $750 million opportunity, with investment potentially showing up later in the 5-year look if approval is received next year.