With a company as diverse as Otter Tail Power
The company reported second-quarter financial results earlier this week that presented flat earnings on 14% higher revenues year over year. Electric power generation brought with it some of the expected coal-delivery problems, but since Burlington Northern Santa Fe
The "other businesses" division, consisting of heavy construction and trucking operations, saw the biggest efficiency improvement of all the component parts, turning last year's $2.9 million loss into just $683,000 of red ink. The segment is expected to become profitable in the near future, thanks to increasing orders of wind power generation towers and overall strong infrastructure growth across the Midwest.
All in all, the gains in plastics and construction balanced out potato problems (in the food ingredient processing division), coal complications, and health headaches, with manufacturing holding rather steady in between, and it all added up to a flat quarter. CEO John Erickson increased 2006 earnings guidance by $0.05 per share, crediting what he called the "soundness of our diversification strategy."
I'd say that a flat quarter is better than the 31% drop that a pure power supplier might have suffered. I love diversification, especially when it comes in small packages. Otter Tail may be smaller than Tyco
Widen your horizons:
Otter Tail is a Motley Fool Hidden Gems recommendation, and both Tyco and 3M are Inside Value picks. To see why Fools like diversification, check out a 30-day free trial to any of our investing services.