Bearish stock to watch: Otter Tail Corporation (NASDAQ: OTTR)

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Otter Tail Corporation (NASDAQ: OTTR) stock lost over 1.1% on 18th February (as of 10:45 am GMT-5; Source: Google finance). For fiscal 2020, the company expects net income from the Plastics segment to be lower than 2019 based on lower expected operating margins in 2020. This is due to an anticipated decline in sale prices of pipe and flat year-over-year resin prices, which was partially offset by slightly higher sales volumes in 2020 compared to 2019. Corporate costs, net of tax, are projected to be higher in 2020 compared with 2019.

The company reported a 5% increase in the Consolidated net income to $86.8 million and increase in consolidated operating revenues to $919.5 million in 2019 compared to $916.4 million in 2018. The increase in fourth quarter profit was driven by increases in Electric and Plastics segment net income and a decrease in Corporate’s net loss, partially offset by a decrease in Manufacturing segment net income

Additionally, the company has increased the company’s quarterly common stock dividend to $0.37 per share, which reflects the annual indicated dividend rate of $1.48 per share and a $.08 increase over the 2019 rate. The company will pay the dividend on March 10, 2020 to shareholders of record on February 14, 2020.

For fiscal 2020, the company expects diluted earnings per share to be in the range of $2.22 to $2.37. OTTR expects the capital expenditures for 2020 to be $385 million compared with actual cash used for capital expenditures of $207 million in 2019. The Electric Segment accounts for 96% of our 2020 planned capital expenditures. The increase in the planned expenditures for 2020 is mainly due to the Merricourt Wind Energy Center (Merricourt) and Astoria Station natural gas-fired electric plant rate base projects. The company expects Electric segment to provide approximately 75% of the company’s consolidated earnings in 2020. This is on back of Capital spending on the Merricourt and Astoria Station rate base projects of $178 million and $81 million, respectively, in 2020. The Merricourt project has rider recovery mechanisms in place in Minnesota and South Dakota and in process for approval in North Dakota. The Astoria Station project has rider recovery mechanisms in place in South Dakota and North Dakota. This project earns AFUDC in Minnesota, is anticipated to be recovered through a rate case in Minnesota and has already been approved in the company’s integrated resource plan. In the Electric segment, there is expectation of increased revenues related to $22 million in projected capital spending for self-funded generator interconnection agreements. There is an expectation of no planned generation plant outages for 2020. Plant outage costs had totaled $3.1 million in 2019

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