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    OTTR
    Earnings call· Jun 2026(Q2 FY26)

    Otter Tail Q2 FY26 earnings call OTTR

    Aug 4, 2026 Source

    Executive summary

    Otter Tail Corporation Q2 FY26 — Raises FY26 EPS Guidance, Large Load Pipeline Expands

    Otter Tail Corporation delivered a mixed second quarter, marked by a significant raise in its full-year adjusted EPS guidance driven by improved outlooks for its Manufacturing and Plastics segments. The utility business continues to execute on its regulatory agenda and expand its large load pipeline, reinforcing its long-term growth trajectory. However, the quarter also saw a year-over-year decline in adjusted EPS, primarily due to receding PVC pipe prices, alongside a substantial legal settlement payment that underscores ongoing challenges in the Plastics segment.

    Highlights

    4

    • Adjusted diluted EPS guidance for FY26 raised to $5.68-$6.08 from $5.22-$5.62.

    • Large load pipeline increased by 350 megawatts, now totaling 1,400 megawatts.

    • Manufacturing segment earnings increased 38% due to favorable product mix and higher sales volumes.

    • Plastics segment sales volumes increased 15% year-over-year, surpassing expectations.

    Concerns

    4

    • Adjusted diluted EPS decreased to $1.66 from $1.85 year-over-year, primarily due to Plastics segment performance.

    • Average sales price of PVC pipe decreased 14% year-over-year.

    • The company paid $103.5 million into escrow for a PVC pipe legal settlement.

    • Projected customer bills are expected to increase between 3% and 4% on a compounded annual growth rate over the next 5 years.

    Guidance & targets

    11
    CategoryTargetConfidence
    Adjusted diluted earnings per share
    $5.68 to $6.08
    high materiality
    High
    Electric segment earnings increase
    14%
    medium materiality
    High
    Manufacturing segment guidance
    increased
    medium materiality
    High
    Plastics segment guidance
    increased
    medium materiality
    High
    2026 average PVC sales price decrease
    approximately 15%
    medium materiality
    High
    Plastics segment earnings
    decline through end of 2027, $45 million to $50 million
    high materiality
    Medium
    5-year rate base compounded annual growth rate
    10%
    high materiality
    High
    Otter Tail Power earnings growth rate
    similar rate to rate base
    high materiality
    High
    Long-term EPS growth rate target
    7% to 9%
    high materiality
    High
    Total shareholder return target
    10% to 12%
    high materiality
    High
    Customer bill increase compounded annual growth rate
    3% to 4%
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Electric
    Earnings decreased slightly year-over-year, benefiting from higher electric rates and timely rate base investment recovery, along with increased C&I sales. This was offset by higher O&M costs due to a planned coal facility outage, vegetation management, and increased labor costs.
    Higher electric rates: positive impactTimely recovery of rate base investments: positive impactIncreased commercial and industrial sales volumes: positive impactHigher operating and maintenance costs: negative impact
    		———decreased slightly
    Manufacturing
    Earnings increased by $0.03 per share, or 38%, primarily driven by higher margins from a favorable product mix and increased sales volumes across several end markets. This was partially offset by higher operating costs, including performance-based compensation.
    Higher margins: due to favorable product mixIncreased sales volumes: in construction, recreational vehicle, and horticulture end marketsHigher operating costs: partially offsetting, including performance-based compensation
    		—38%—increased $0.03 per share
    Plastics
    Adjusted earnings decreased by $0.14 per share, or 11%, mainly due to a 14% decrease in average pipe sales prices. This was partially offset by a 15% increase in sales volumes, which outpaced expectations and moderated the rate of price decline.
    Lower pipe sales prices: primary driver of decreaseHigher sales volumes: partially offsettingAverage sales price decrease: 14% year-over-yearSales volumes increase: 15% year-over-year
    		—-11%—decreased $0.14 per share

    Operational metrics

    12
    Adjusted diluted EPS
    $1.66down from $1.85
    Q2 FY26

    Adjusted diluted earnings per share for the second quarter, compared to the same period last year.

    Equity layer as percentage of total capital
    60%
    end of June

    Company's equity layer at the end of the second quarter, indicating financial strength.

    Available liquidity
    $600M
    end of June

    Total available liquidity, including cash and cash equivalents.

    Cash and cash equivalents
    $278M
    end of June

    Portion of available liquidity held as cash and cash equivalents.

    Debt maturing in Q4
    $80M
    Q4 FY26

    Debt at the parent level planned for retirement without replacement.

    PVC pipe legal settlement amount
    $103.5M
    Q2 FY26

    Amount agreed to be paid to resolve PVC pipe antitrust litigation.

    PVC pipe legal settlement after-tax impact
    $1.84
    Q2 FY26

    After-tax impact of the legal settlement charges on EPS.

    PVC pipe average sales price decrease
    14%YoY
    Q2 FY26

    Year-over-year decrease in average sales price for PVC pipe, with a moderated rate of decline.

    PVC pipe sales volumes increase
    15%YoY
    Q2 FY26

    Year-over-year increase in PVC pipe sales volumes, surpassing expectations.

    Customer bill increase CAGR
    3% to 4%
    5-year planning period

    Projected compounded annual growth rate for customer bill increases.

    Corporate costs increase
    $0.07
    Q2 FY26

    Increase in corporate costs per share, driven by internal allocation of interim tax expense and employee compensation.

    Minnesota rate case requested net revenue increase
    $42.3Mamended from $44.8M
    Q2 FY26

    Amended request for net revenue increase in the Minnesota rate case.

    Industry KPIs

    4
    MetricValueDetails
    Retail sales growthincreased
    Regulatory rate base growth10%%
    New gas generation builds upgrades50MW
    Contracted large load capacity esas loas1,400MW

    Orderbook & backlog

    1
    Large load pipeline1,400 MWQ2 FY26

    increased by 350 MW

    35% data center, remaining clean fuel and thermal storage; includes interruptible opportunities

    Capital programs

    8
    5-year capital investment planunderway$1.9B
    Funding: internal cash flow, debt

    Benefit: customer-focused growth

    Primary driver of growth for Otter Tail Power, funded without external equity needs.

    Solway Solar Projectunder construction

    One of two solar projects currently under construction and progressing well.

    Abercrombie Solar Projectunder construction

    One of two solar projects currently under construction and progressing well.

    Battery Storage Projectunder development

    Battery storage facility targeting to be online in 2028.

    MISO Tranche 1 345 kV Transmission Projectsunder development

    Benefit: nearly 200 miles of transmission lines

    Secured route permits for two large regional transmission projects, marking an important milestone for reliability-driven investments.

    50 MW natural gas facility (IRP)proposed

    Benefit: 50 MW generation capacity

    Recommended in the 15-year Integrated Resource Plan filed with the Minnesota Commission.

    50 MW wind facility (IRP, 2035)proposed

    Benefit: 50 MW generation capacity

    Recommended in the 15-year Integrated Resource Plan filed with the Minnesota Commission.

    50 MW wind facility (IRP, 2040)proposed

    Benefit: 50 MW generation capacity

    Recommended in the 15-year Integrated Resource Plan filed with the Minnesota Commission.

    Risks & headwinds

    5
    PVC pipe legal settlementQ2 FY26

    $103.5 million

    Mitigation: Settlement reduces uncertainty, distraction, and significant costs/exposure associated with complex antitrust litigation.

    Plastics segment earnings declinethrough FY27

    expected to continue through end of 2027

    Mitigation: Management expects normalization in 2028, with the segment still producing accretive returns and incremental cash for reinvestment.

    Challenging agriculture industry conditionscurrent

    weak farm economy, elevated costs, lower relative commodity prices, ongoing trade disruption

    Higher operating and maintenance costsQ2 FY26

    planned outage at coal facility, timing of vegetation management expenses, higher labor costs

    Softer H2 sales volumes for PlasticsH2 FY26

    expected after Q2 pull-forward

    Mitigation: Annual sales volume assumption remains largely unchanged, indicating overall demand stability.

    What to watch in Q3 FY26

    5

    Minnesota Rate Case Outcome

    Next quarter
    CurrentAmended net revenue increase request to $42.3M
    TargetConstructive outcome / Commission decision

    Why it matters

    The outcome of the Minnesota rate case will directly impact regulated earnings and rate base growth for the utility segment.

    We submitted our rebuttal testimony late last month. In the filing, we amended our requested net revenue increase to $42.3 million from $44.8 million due to an updated test year information. Our team continues to work towards reaching a constructive outcome.

    Q&A highlights

    6

    Can you comment on the historical 5-7% net profit margin range for the Manufacturing business, given current strength?

    The company is currently tracking at about a 5% net income return for the Manufacturing segment, with opportunities for improvement through increased volumes and operating efficiencies.

    “If you look, say, at our first 6 months of the year, it would be at about a 5% net income return. We do think there's opportunity to improve on that with increased volumes, providing increased leveraging of our fixed costs along with operating efficiencies, production and productivity gains in the business.”

    asked by Tate Sullivan · answered by Tyler Nelson

    2 min read5 chapters

    Detailed Narrative

    01

    Regulatory and Resource Planning Updates

    Otter Tail Power advanced its regulatory agenda by securing route permits for two MISO Tranche 1 345 kV transmission projects, spanning nearly 200 miles. The company also filed its 15-year Integrated Resource Plan (IRP) with the Minnesota Public Utilities Commission, proposing a 50-megawatt natural gas facility by 2031/2032 and two 50-megawatt wind facilities by 2035 and 2040, respectively. In the Minnesota rate case, the requested net revenue increase was amended to $42.3 million from $44.8 million due to updated test year information, with a constructive outcome still sought.

    02

    Expanding Large Load Pipeline and Strategy

    The company's large load pipeline increased by approximately 350 megawatts, reaching a total of 1,400 megawatts. This pipeline is diverse, with approximately 35% related to data centers and the remainder from clean fuel and thermal storage opportunities, many of which are interruptible. Otter Tail Power filed large load tariffs with Minnesota, North Dakota, and South Dakota commissions, designed to protect existing customers by directly assigning costs to new large loads and allocating fixed costs to produce a rate credit for existing customers.

    03

    Manufacturing Segment Performance and Market Conditions

    The Manufacturing segment saw a 38% increase in earnings, driven by a favorable product mix and higher sales volumes in construction, recreational vehicle, and horticulture end markets. The industrial end market remains strong, supporting growing energy demand. The company noted improved industry conditions and its ability to leverage added capacity in Georgia. However, the agriculture industry continues to face challenges due to a weak farm economy, elevated costs, lower commodity prices, and trade disruptions.

    04

    Plastics Segment Dynamics and Legal Settlement

    The Plastics segment experienced a 14% year-over-year decline in average sales prices for PVC pipe, though the rate of decline moderated. Sales volumes increased 15% year-over-year, exceeding expectations, partly due to customers pulling forward orders ahead of announced resin price increases. The company entered into settlement agreements for the U.S. PVC pipe antitrust litigation, agreeing to pay $103.5 million to resolve claims, with preliminary court approval received. The full amount was paid into an escrow account by the end of July.

    05

    Financial Strength and Capital Investment Plan

    Otter Tail Corporation maintains a strong financial position with an equity layer of 60% of total capital and over $600 million in available liquidity, including $278 million in cash. This financial strength enables the company to fund its $1.9 billion 5-year capital investment plan for Otter Tail Power without external equity needs. The plan includes solar projects (Solway operational H1 2027, Abercrombie 2028) and a battery storage facility (online 2028), with periodic debt issuance at Otter Tail Power to maintain its authorized capital structure. The parent company plans to retire $80 million of maturing debt in Q4 without replacement.

    AI-generated summary of the company’s earnings call. Not investment advice.