MDU Resources Underperforming: 3 Reasons to Avoid and 1 Stock to Buy Instead

MDU Resources has experienced a decline in revenue by 37.6% over the past five years and a 9.9% decrease in EPS. The company's high debt levels of $2.05 billion and 7× net-debt-to-EBITDA ratio indicate over-leveraging, increasing the risk of permanent loss of capital. As such, we recommend caution with MDU Resources and suggest an alternative stock to buy.

MDU Resources Group, Inc. (MDU) has been facing significant financial challenges over the past five years, with a 37.6% decline in revenue and a 9.9% decrease in earnings per share (EPS). The company's high debt levels, standing at $2.05 billion, and a net-debt-to-EBITDA ratio of 7× indicate over-leveraging, raising concerns about potential permanent loss of capital. Given these circumstances, investors are advised to exercise caution when considering MDU Resources as an investment.

The company's recent quarterly earnings report highlighted a 10.4% increase in income from continuing operations compared to the same period last year, driven primarily by robust performance in the Pipeline and Natural Gas Distribution segments. However, this growth was partially offset by higher operating and maintenance expenses and depreciation costs, reflecting the challenges of expansion projects and increased customer demand MDU Resources Group, Inc.^[3].

MDU Resources Group has also been making changes to its shareholder base, with several institutional investors adjusting their positions. Hsbc Holdings PLC, for instance, reduced its stake by 90%, now holding only 10,376 shares valued at $175,000 after selling 93,155 shares. Meanwhile, Comerica Bank and Ameriprise Financial Inc. increased their stakes, with Ameriprise boosting its position by 134% to own 507,793 shares worth $9,152,000 Hsbc Holdings PLC Sells 93,155 Shares of MDU Resources Group, Inc. $MDU^[1].

The company's dividend policy has also seen adjustments, with a recent quarterly dividend increase to $0.14 per share, representing an annualized yield of 3.5%. However, this increase comes at a time when the company's dividend payout ratio is at 49.06%, indicating a significant portion of earnings being distributed to shareholders Hsbc Holdings PLC Sells 93,155 Shares of MDU Resources Group, Inc. $MDU^[1].

In addition to these financial challenges, MDU Resources Group has faced recent changes in analyst ratings, with Wall Street Zen lowering its rating from "hold" to "sell," while two analysts maintain a "buy" rating and one analyst holds a "hold" rating, resulting in a consensus rating of "moderate buy" with a target price of $18.00 Hsbc Holdings PLC Sells 93,155 Shares of MDU Resources Group, Inc. $MDU^[1].

Given the company's financial struggles and the over-leveraging indicated by its debt levels, investors are advised to proceed with caution. Alternative investment opportunities should be considered, especially those with more stable financial performance and lower risk profiles.