MDU Resources Group, Inc. :MDU-US: Earnings Analysis: Q2, 2017 By the Numbers : August 28, 2017

MDU Resources Group, Inc. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of MDU Resources Group, Inc. – Sempra Energy, Avista Corporation, NorthWestern Corporation, Black Hills Corporation, Vectren Corporation, Northwest Natural Gas Company, Xcel Energy Inc., CenterPoint Energy, Inc. and Vulcan Materials Company (SRE-US, AVA-US, NWE-US, BKH-US, VVC-US, NWN-US, XEL-US, CNP-US and VMC-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 1,067.64 million, Net Earnings of USD 44.41 million.
  • Gross margins narrowed from 11.90% to 11.10% compared to the same period last year, operating (EBITDA) margins now 12.10% from 13.50%.
  • Year-on-year change in operating cash flow of -7.78% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 1067.64 937.93 1016.1 1208.57 1043.95
Revenue Growth (%YOY) 2.27 3.62 -4.37 -5.62 5.85
Earnings (mil) 44.41 35.64 66.5 88.39 166.95
Earnings Growth (%YOY) -73.4 38.65 43.63 39.9 665.43
Net Margin (%) 4.16 3.8 6.54 7.31 15.99
EPS 0.21 0.19 0.33 0.42 -0.56
Return on Equity (%) 1.92 1.53 2.88 3.9 7.05
Return on Assets (%) 2.87 2.29 4.21 5.55 10.27

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Market Share Versus Profits

Revenues History
Earnings History

MDU-US‘s change in revenue this period compared to the same period last year of 2.27% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that MDU-US is holding onto its market share. Also, for comparison purposes, revenues changed by 13.83% and earnings by 24.60% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 11.90% to 11.10%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 13.50% to 12.10% in this time frame. For comparison, gross margins were 11.90% and EBITDA margins were 12.32% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

MDU-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 27.54 days from 32.63 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

MDU-US‘s change in operating cash flow of -7.78% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 8.30% to 7.27% and (2) one-time items that contributed to a decrease in pretax margins from 6.48% to 5.59%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

MDU Resources Group, Inc. provides natural resource products and related services to energy and transportation infrastructure. The company operates through the following segments: Electric, Natural Gas Distribution, Pipeline and Midstream, Construction Materials and Contracting, Construction Services, Refining, and Other. The Electric segment generates, transmits and distributes electricity in Montana, North Dakota, South Dakota and Wyoming. The Natural Gas Distribution segment distributes natural gas in Montana, North Dakota, South Dakota, Wyoming, Idaho, Minnesota, Oregon, and Washington. The Pipeline and Midstream segment provides natural gas transportation, underground storage, processing and gathering services, as well as oil gathering, through regulated and non-regulated pipeline systems and processing facilities primarily in the Rocky Mountain and northern Great Plains regions. The Construction Materials and Contracting segment mines aggregates and markets crushed stone, sand, gravel and related construction materials, including ready-mixed concrete, cement, asphalt, liquid asphalt and other value-added products. It also performs integrated contracting services. The Construction Services segment provides utility construction services specializing in constructing and maintaining electric and communication lines, gas pipelines, fire suppression systems, and external lighting and traffic signalization. It also offers utility excavation and inside electrical and mechanical services, and manufactures and distributes transmission line construction equipment and other supplies. The Refining segment refines crude oil and produces and sells diesel fuel, naphtha, atmospheric tower bottoms and other by-products of the production process. The Other segment includes the activities of Centennial Capital, which insures various types of risks as a captive insurer for certain of the firm’s subsidiaries. MDU Resources Group was founded by C. C. Yawkey, R.M. Heskett and Walter Alexander on March 14, 1924 and is headquartered in Bismarck, ND.

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