What is driving the recovery in the recreational vehicle market given negative consumer sentiment?

Inventory levels at dealers and manufacturers have normalized, allowing for better throughput on demand. Strength is observed in higher-end RV models, while lower-end models remain soft due to macroeconomic conditions. “inventory levels in the channel, both at the dealer and the manufacturer have normalized. I think they're at a good level where we will see more throughput on any demand at the end customer level.”

Did the letter of intent customer slide back into the broader pipeline or give up altogether?

The customer is not currently in the pipeline, but the company continues to explore options, and it is possible they could return in the future. “No, we continue to work with that customer. I would say they're not currently in the pipeline of projects, but I think we'll continue to explore options and as possible we can see them come back in.”

Was permitting/site issues or tax incentives more important for the customer's decision to withdraw?

Both permitting challenges and failed tax incentive legislation were significant barriers for the customer to move forward in South Dakota. “From our understanding, I think both of them were definitely barriers for them to want to move forward in South Dakota.”

OTTR

Otter Tail (OTTR) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Industrials· May 5, 2026

Source: earnings call transcript

Executive summary

Otter Tail Corporation Q1 FY26 — Strong Electric and Manufacturing Performance, Affirmed FY26 EPS Guidance

Otter Tail Corporation delivered a strong first quarter, driven by robust performance in its Electric and Manufacturing segments, despite a planned decline in Plastics earnings. The company reaffirmed its full-year EPS guidance, supported by ongoing rate base growth and strategic capital investments. Management emphasized its commitment to long-term shareholder value through diversified operations and a self-funded capital plan, while navigating challenges like large load pipeline adjustments and volatile PVC resin costs.

Highlights

Diluted EPS increased to $1.73 in Q1 FY26 from $1.62 in Q1 FY25, a 7% increase.
Electric segment earnings increased $0.25 per share or 43% in Q1, driven by increased rates and rate base investments.
Manufacturing segment earnings increased $0.06 per share, driven by higher margins, sales volumes, and production efficiency.
Completed a $230 million wind repowering project, expected to increase output by 20%.
Completed Vinyltech expansion Phase 2 on budget, adding 15% production capacity for the Plastics segment.

Concerns

Plastics segment earnings decreased $0.24 per share or 24% due to a 19% decline in average PVC pipe sales prices.
Removed a 430 MW large load from the pipeline due to permitting challenges and failed tax incentive legislation.
Anticipate higher O&M spend mid-year in the Electric segment due to a planned major coal facility outage and asset health initiatives.
Expect second half of the year Plastics sales volumes to be negatively impacted by accelerated Q2 buying and broader macroeconomic conditions.

Guidance & targets

Category	Target	Timeline	Confidence
Diluted earnings per share	$5.22 to $5.62 high materiality	FY26	High
Rate base compounded annual growth rate	10% high materiality	5-year	High
EPS growth from rate base growth	near a 1:1 ratio medium materiality	5-year planning period	High
Customer bill increase	3% to 4% medium materiality	5-year planning period	Medium
Long-term Plastics segment earnings	$45M to $50M medium materiality	FY28	Medium
Long-term earnings per share growth rate	7% to 9% high materiality	long-term	High
Total targeted shareholder return	10% to 12% high materiality	long-term	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Electric Earnings increased due to increased electric rates and the recovery of rate base investments, including interim rates in Minnesota and South Dakota, and new base rates in North Dakota. Higher commercial sales volumes also contributed. These were partially offset by unfavorable weather, higher operating and maintenance costs, and increased depreciation expense. Earnings per share increase: $0.25Earnings growth: 43%	—	—	—	—
Manufacturing Earnings increased driven by higher margins, primarily from a favorable product mix. Increased sales volumes and improved production efficiency also contributed. These were partially offset by higher general and administrative costs. Earnings per share increase: $0.06	—	—	—	—
Plastics Earnings decreased primarily due to lower average sales prices of PVC pipe, which was generally in line with expectations and continues a receding pricing trend since mid-2022. This was partially offset by higher sales volumes (opportunistic specialty pipe sale, increased demand spurred by announced PVC resin cost increases) and lower input material costs. Earnings per share decrease: $0.24Earnings decrease: 24%Average sales price decrease: 19% (from Q1 2025)Sales volumes increase: 7% (from Q1 2025)Material input costs decrease: 12% (from Q1 2025)	—	—	—	—
Corporate Corporate costs decreased primarily driven by a timing-based tax benefit compared to the same period last year. Costs decrease: $0.04 per share	—	—	—	—

Orderbook & backlog

Large Load Pipeline (Phase 1) increased by approximately 500 MW Q1 FY26

increased by ~500 MW

Only adjust internal forecast for loads with assigned electric service agreement.

Removed Large Load 430 MW Q1 FY26

removed

Previously under a term sheet; removed due to permitting related challenges and failed tax incentive legislation in South Dakota.

Capital programs

Wind Repowering Project completed $230M

Benefit:20% increase in output

upgrading the wind towers at 4 of our owned wind energy centers. These upgrades are expected to result in a 20% increase in output and are economical for our customers due to the renewed renewable energy tax credits.

Vinyltech Expansion Phase 2 completed

Benefit:15% additional production capacity

This marks the end of a multiyear expansion project that added 15% of additional production capacity for our Plastics segment increased our manufacturing footprint and expanded our raw material storage capabilities. This multiyear expansion project was completed on budget.

Solar Development Projects underway

Start: early stages of construction

Our 2 solar development projects are in the early stages of construction. During the first quarter, our team members secured the solar panels needed for these projects. This strategy eliminates tariff-related risk and helps to avoid any potential cost increases for the benefit of our customers.

Battery Storage Project under development

Benefit:75 MW storage facility

We are targeting to bring this 75-megawatt storage facility online in 2028.

James Down to Eleni Tranche 1 Transmission Project under development

We continue to work through areas of landowner and local government opposition associated with citing and certain permits for the [ James Down to Eleni ] Tranche 1 project.

Big Stone to Alexandria Tranche 1 Transmission Project under development

Benefit:nearly 100-mile transmission line

We received a Minnesota route permit last week for the Big Stone to Alexandria Tranche 1 project a nearly 100-mile transmission line.

5-year Capital Spending Plan (Electric Segment) underway $1.9B

Funding: existing cash and cash generated from operations

Start: FY26

Benefit:10% rate base compounded annual growth rate

Our planned investment in our Electric segment totals $1.9 billion and is expected to produce a rate base compounded annual growth rate of 10%. We continue to project up to $750 million in incremental capital investment opportunity within our Electric segment over the planning period.

Risks & headwinds

Plastics Pricing Decline through the end of 2027

decreased 19% from the Q1 2025 average

Mitigation:Anticipate higher sales volumes from recently expanded production capacity and input cost increases generally in line with inflation to partially offset.

PVC Resin Cost Increases near-term

now seeing an increase in PVC resin costs

Mitigation:Expect second quarter sales volumes to be strong and product pricing to temporarily stabilize as distributors accelerate pipe purchasing before potential PVC cost increases take effect.

Large Load Pipeline Uncertainty Q1 FY26

removed the 430-megawatt load

Mitigation:Continue to engage with companies interested in adding new large loads and maintain a prudent approach with guardrails to protect customers and shareholders.

Transmission Project Delays ongoing

believe there could be delays

Mitigation:Expect projects to move forward due to reliability-related benefits, despite landowner/local government opposition and a FERC complaint against MISO's tranche 2.1 projects.

Electric Segment O&M Increase second quarter

expect higher O&M spend midyear

Mitigation:Related to asset health and resiliency initiatives and a planned major outage at a coal facility.

Manufacturing Demand Visibility second half of the year

less certain in the second half of the year

Mitigation:Optimistic about increased sales volumes in the first quarter, but acknowledge potential for softness.

Plastics H2 Volume Impact second half of the year

negatively impacted by the accelerated buying we are seeing now as well as broader macroeconomic conditions

Mitigation:Annual sales volume forecast remains largely unchanged despite anticipated H2 headwinds.

What to watch in Q2 FY26

Minnesota Rate Case Progress

Q2 FY26

Current In discovery, heavy last 2 months

Target Intervenor testimony received

Why it matters

This is a key step in the regulatory process that will inform the final rate case outcome and future earnings.

The next step will be the expectation of getting the intervenor testimony, which we expect sometime here in the second quarter.

Find out whether OTTR delivers this. Inve re-checks your case every morning.

Q&A highlights

Will the Iranian situation alter expectations for global resin dynamics, or is it expected to resolve before the second half of the year?

Management believes the situation will be resolved long-term, but it is currently impacting the U.S. domestic export price of resin, driving up domestic prices. They are unsure if it will be fully resolved by the second half of the year.

“we just know that it is impacting the U.S. domestic export price of resin, which drives up the domestic price at this time.”

asked by Chris Ellinghaus · answered by Chuck MacFarlane

2 min read 5 chapters

Detailed narrative

Leadership Transition and Strategy

The company announced a leadership transition with Tim Rogelstad elected President of Otter Tail Corporation, Todd Wallan as Senior Vice President and President of Otter Tail Power Company, and Tyler Nelson as Vice President and Chief Financial Officer. These changes are the result of long-standing succession planning by the Board and management team.

Management emphasized that these changes do not alter the company's strategy or priorities, but rather serve to strengthen the leadership bench and reinforce the commitment to delivering long-term shareholder value.

Regulatory Progress and IRP Filing

Otter Tail Power achieved a constructive outcome in its South Dakota rate case, with the commission approving the settlement agreement and new base rates implemented on April 1. This outcome achieved approximately 75% of the company's requests when considering adjustments for rider treatment.

In Minnesota, interim rate revenues of $28.6 million went into effect on January 1, subject to refund, as the rate case continues to progress. The company is also on track to file its Integrated Resource Plan (IRP) in Minnesota later this month, following stakeholder meetings.

Capital Project Execution and Development

The company completed its $230 million wind repowering project, upgrading wind towers at four energy centers, which is expected to result in a 20% increase in output. Phase 2 of the Vinyltech expansion was also completed on budget, adding 15% additional production capacity for the Plastics segment.

Two solar development projects are in early construction, with solar panels secured to mitigate tariff risks. A 75-megawatt battery storage facility is under development, targeting an online date in 2028, and regional transmission projects are progressing despite some opposition and potential delays.

Large Load Pipeline Dynamics

Otter Tail removed a 430 MW large load from its pipeline that was previously under a term sheet, due to permitting challenges and failed tax incentive legislation in South Dakota. However, Phase 1 of the large load pipeline increased by approximately 500 MW, indicating continued interest.

The company maintains a prudent approach to large load additions, ensuring appropriate guardrails are in place to protect customers and shareholders, and only adjusts internal forecasts for loads with assigned electric service agreements.

Manufacturing and Plastics Market Conditions

Manufacturing dealer inventory levels have largely normalized, leading to increased sales volumes in construction and recreational vehicle markets, while the industrial end market remains strong. The agriculture industry, however, faces challenges due to a weak foreign economy. In the Plastics segment, average sales prices of PVC pipe declined 19% year-over-year, but sales volumes increased 7% due to an opportunistic specialty pipe sale and accelerated distributor demand ahead of anticipated PVC resin cost increases.

Material input costs decreased 12% year-over-year, but PVC resin costs are now rising due to global oil prices impacting U.S. exports.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.