Otter Tail
What analysts say:
- Buy, sell, or waffle? Only four Wall Street firms follow this micro-cap stock today. Two of them want to sell and the other two are holding. In our Motley Fool CAPS community, this Motley Fool Hidden Gems recommendation is riding 231 user ratings all the way to five stars and a 95% approval rating.
- Revenue. Those analysts expect about $289.5 million in net sales, up a modest 3.4% over last year's $279.9 million.
- Earnings. On the bottom line, the Street says we should find $0.38 per share, slightly above last year's $0.37 per share.
What management says:
In the latest earnings report, CEO John Erickson said that results were in line with internal targets everywhere he looked, and then he reaffirmed his annual earnings target in the $1.60-to-$1.80-range per share. The release also highlighted Otter Tail's long dividend history, with uninterrupted payouts to investors every year since 1938 and yearly increases since 1975.
What management does:
These are the kinds of numbers that tend to scare away anyone who doesn't care to understand the business. Yes, margins are getting worse right now, and the lack of free cash flow looks troubling. On top of that, revenue and earnings have been shrinking rather than growing. But the cash flow situation is a result of investments in another coal-fired power plant, as well as more wind tower manufacturing facilities. Earnings were somewhat artificially inflated last year because the Midwest power grids had just gone through an upgrade, and Otter Tail stood to reap outsized rewards from the inefficiencies of others -- but that imbalance has since been fixed.
|
12/05 |
03/06 |
06/06 |
09/06 |
12/06 |
03/07 |
|
|---|---|---|---|---|---|---|
|
Gross |
27.1% |
27.0% |
26.7% |
25.7% |
24.7% |
23.6% |
|
Operating |
10.1% |
10.3% |
10.1% |
9.1% |
8.9% |
7.9% |
|
Net |
6.4% |
6.6% |
5.4% |
4.9% |
4.6% |
4.1% |
|
FCF/Revenue |
3.6% |
0.9% |
2.4% |
2.4% |
1.0% |
0.9% |
|
Y-O-Y Growth |
12/05 |
03/06 |
06/06 |
09/06 |
12/06 |
03/07 |
|---|---|---|---|---|---|---|
|
Revenue |
20.8% |
17.1% |
15.4% |
11.9% |
12.5% |
12.2% |
|
Earnings from Continuing Operations |
33.1% |
32.8% |
24.2% |
-5.3% |
-5.8% |
-19.7% |
One Fool says:
That coal plant is meeting some spirited resistance from environmental groups, but Otter Tail and its allies are likely to get their way regardless. The facility should add to earnings rather than to costs within five years -- yes, Otter Tail requires a long-term investment horizon.
Otter Tail is a Motley Fool Hidden Gems selection. Try the market-beating service free for 30 days.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. He does use electric power on a daily basis, and this story was crafted from recycled electrons. You can check out Anders' holdings if you like, and Foolish disclosure is the prognosticator of prognosticators.
