Breaking Down Otter Tail Corporation (OTTR) Financial Health: Key Insights for Investors

You're looking at Otter Tail Corporation (OTTR) and trying to reconcile the short-term dips in their diversified segments with the big, long-term utility growth story. Honestly, the third quarter of 2025 gave us a mixed bag, but the forward-looking signal is strong. The company reported diluted earnings per share (EPS) of $1.86 for Q3, a slight pullback from last year, but that was mostly driven by a 13.9% drop in Plastics segment revenue due to lower sales prices, even though the Manufacturing segment's net income jumped 80.1%. So, the big takeaway is that management is defintely leaning into their core utility business, boosting their 2025 diluted EPS guidance to a tight range of $6.32 to $6.62 and, more importantly, unveiling a massive new 5-year capital spending plan for Otter Tail Power totaling $1.9 billion. That's a huge investment, designed to push their rate base compounded annual growth rate to 10% and anchor a new long-term EPS growth target of 7% to 9%. The short-term volatility is just noise against a clear capital-intensive growth plan.

Revenue Analysis

You're looking at Otter Tail Corporation (OTTR) and trying to understand where the money actually comes from, which is smart because the revenue mix is changing. The direct takeaway is that while the Electric utility segment is the stable growth engine, the overall 2025 revenue is seeing a near-term contraction, projected at a trailing twelve months (TTM) decline of about -3.18% year-over-year as of September 30, 2025.

The company's revenue streams are split across three distinct segments: Electric, Manufacturing, and Plastics. This diversification is a key part of the business model, but it also means you have to track three different cycles. The consensus full-year 2025 revenue estimate is around $1.31 billion, but the recent quarterly results show a clear shift in performance across the segments.

Here's the quick math on the segment contributions from the third quarter of 2025, which gives you the freshest look at the revenue mix. The total Q3 2025 operating revenue was $325.6 million.

The Electric segment, which is the regulated utility, is defintely the most reliable performer, showing a solid 6.3% increase in Q3 operating revenues. This growth was driven by two concrete factors: higher fuel recovery revenue and increased sales volumes, which is exactly what you want to see from your base utility business.

Still, the non-Electric segments are the source of the near-term revenue drag. The Plastics segment saw the steepest drop, with operating revenues falling 13.9% in Q3 2025. This wasn't a volume problem; it was a price problem, specifically a 17% decline in sales prices. Meanwhile, the Manufacturing segment's revenues declined by 3.7%, primarily because of an 8% decrease in sales volumes.

What this estimate hides is the long-term strategic play. While the near-term revenue growth forecast is modest at 3.1% per year, management is focusing on the utility side with a massive $1.4 billion investment pipeline for grid, renewable, and transmission projects. That capital spending is what's expected to underpin the Electric segment's long-term earnings growth, even as the non-Electric segments face cyclical headwinds. To be fair, the non-Electric segments are still expected to contribute a significant portion of 2025 earnings, estimated at 64% of the total net of corporate costs.

• Electric revenue up on fuel recovery and volume.
• Plastics revenue down due to lower sales prices.
• Manufacturing revenue fell on lower sales volumes.

If you want to dig deeper into the ownership structure and who is betting on this mix, you can check out Exploring Otter Tail Corporation (OTTR) Investor Profile: Who's Buying and Why?

Profitability Metrics

You're looking for a clear picture of Otter Tail Corporation (OTTR)'s ability to turn revenue into profit, and honestly, the story is one of a solid utility segment compensating for a volatile manufacturing arm. The company's overall profitability is strong, but the near-term trend shows margin compression, a key risk you need to watch.

For the trailing twelve months (TTM) ended June 30, 2025, Otter Tail Corporation (OTTR) demonstrated a robust conversion of revenue, with a net income of approximately $286.16 million on revenues of $1,312 million. That translates to a net profit margin of roughly 21.8%. This is a high-quality margin, especially when compared to the Utilities Select Sector SPDR ETF (XLU) which, as a proxy for the broader utilities sector, shows a net margin closer to 15.07%. Otter Tail Corporation (OTTR) is defintely outperforming its utility peers on the bottom line.

Here's the quick math on the key margins for the TTM period ending mid-2025, which gives us the clearest look at their current operational efficiency:

What this estimate hides is the internal pressure. The gross profit margin of 43.2% is slightly below the industry average of 46.05%, but the operating profit margin of 27.7% is significantly higher than the sector's 22.68%. This suggests exceptional control over selling, general, and administrative (SG&A) costs, or non-utility operating expenses, which is a major positive for management.

Still, the trend is a headwind. Analysts are forecasting Otter Tail Corporation (OTTR)'s net profit margins to potentially fall from the current 21.8% down to as low as 13.9% over the next three years. This isn't a utility problem; it's a non-electric segment problem. The Plastics segment, for example, saw PVC pipe sales prices decline approximately 17% year-over-year in Q3 2025, which dragged net income down by 20.2% for that segment, despite lower input material costs. The Manufacturing segment is also grappling with compressed operating margins due to lower production and sales volumes.

Your action here is to monitor the segment-level performance: look for stabilization in the Plastics and Manufacturing segments' gross margin trends. The Electric segment, which is regulated, remains the anchor with a planned 10% compounded annual growth rate (CAGR) in its rate base, helping to offset the industrial volatility. For a deeper look at the ownership dynamics behind these segments, check out Exploring Otter Tail Corporation (OTTR) Investor Profile: Who's Buying and Why?

• Electric segment net income fell only 4.3% in Q3 2025 despite unfavorable weather.
• Manufacturing segment net income jumped 80.1% in Q3 2025 due to production efficiencies.
• Future margin risk comes from regulatory changes and rising capital expenditures.

Debt vs. Equity Structure

You want to know if Otter Tail Corporation (OTTR) is leaning too heavily on debt to fund its growth, a fair question for a capital-intensive utility. The direct takeaway is that Otter Tail Corporation maintains a conservative, equity-heavy capital structure, which is a significant strength, especially compared to its peers.

As of the trailing twelve months (TTM) ending Q3 2025, Otter Tail Corporation's debt-to-equity (D/E) ratio stood at a very healthy 0.57. This means the company uses less than 60 cents of debt for every dollar of shareholder equity. For context, the average D/E ratio for the US Electric Utilities industry is much higher, around 1.582 as of early 2025. Otter Tail Corporation's ratio is defintely a marker of financial stability, showing a strong reliance on equity funding and retained earnings over external borrowing.

Here's the quick math on their debt profile as of September 30, 2025:

• Long-Term Debt: Approximately $1.0 billion in principal outstanding.
• Short-Term Debt: The company has actively managed this, with net repayments of short-term borrowings totaling $69.6 million through the first nine months of 2025.
• Total Stockholders' Equity: Approximately $1.774 billion as of June 2025.

The company's debt-to-capitalization ratio was also low at 25% as of March 31, 2025, which is well below the financial covenant limit of 65% in its debt agreements. That's a huge buffer for future capital needs.

To be fair, a utility needs debt-it's a cheap, reliable way to fund massive infrastructure projects like new power plants or transmission lines. Otter Tail Corporation balances this need with a conservative approach, primarily using long-term debt to fund its capital expenditure (capex) plan, which is focused on growing the rate base (the asset value on which the utility can earn a regulated return). The proceeds from debt issuances are strategically allocated to growth areas like renewable energy projects and transmission infrastructure.

Recent debt activity in 2025 shows this strategic focus:

• Issued $100.0 million in long-term debt during the nine months ended September 30, 2025, specifically to repay short-term borrowings and fund capital investments.
• This included a private placement of $50 million of 5.49% Series 2025A Senior Unsecured Notes due in 2035 and $50 million of 5.98% Series 2025B Senior Unsecured Notes due in 2055.
• The long maturity dates, especially the 2055 notes, lock in fixed interest rates and reduce refinancing risk in a volatile rate environment.

The company's investment-grade credit rating of BBB+ from S&P reflects this conservative capital structure and strong cash flows. This rating helps them access capital markets on favorable terms, keeping their cost of debt low. For a deeper dive into the long-term strategy that guides these financing decisions, you can check out the Mission Statement, Vision, & Core Values of Otter Tail Corporation (OTTR).

Liquidity and Solvency

You need to know if Otter Tail Corporation (OTTR) can cover its near-term bills and whether its cash engine is running smoothly. The quick answer is yes, the company's liquidity position is defintely strong, driven by high cash reserves and a conservative balance sheet structure. As of the third quarter of 2025, the company's liquidity ratios are exceptionally healthy, but you should watch the slight dip in operating cash flow.

Current and Quick Ratios Signal Strong Liquidity

Otter Tail Corporation's short-term liquidity, which is its ability to meet obligations due within one year, is excellent. The Current Ratio-Current Assets divided by Current Liabilities-was approximately 3.57 for the third quarter of 2025 (Q3 2025). This means Otter Tail Corporation has $3.57 in current assets for every dollar of current liabilities. For a utility and diversified industrial company, that's a very comfortable buffer.

The Quick Ratio (or Acid-Test Ratio), which excludes inventory to give a truer picture of immediate cash strength, stood at about 2.82 for the same period. This ratio is well above the typical 1.0x benchmark, showing that even without selling off inventory, the company has ample liquid assets to cover its short-term debt. That's a great sign of financial flexibility.

Analysis of Working Capital Trends

Working capital (Current Assets minus Current Liabilities) has shown a positive but slightly decreasing trend through the first half of 2025, which is something to monitor. Here's the quick math using the available quarterly data for the fiscal year 2025:

• Q1 2025 Working Capital: Approximately $402.9 million ($651.3M Current Assets - $248.4M Current Liabilities).
• Q2 2025 Working Capital: Approximately $320.2 million ($630M Current Assets - $309.8M Current Liabilities).

This decline of about $82.7 million in working capital from Q1 to Q2 2025 suggests a higher utilization of current assets or an increase in short-term payables, which is not uncommon for a company funding significant capital projects. Still, the absolute number remains high, and the Current Ratio is robust, so there are no immediate working capital concerns.

Cash Flow Statements Overview

The cash flow statement for the nine months ended September 30, 2025, shows a mixed picture, typical of a growing utility with capital-intensive projects. You want to see strong cash from operations to fund growth, and Otter Tail Corporation delivers, but with a slight dip year-over-year.

The decrease in cash provided by operating activities to $288.9 million for the nine-month period, down from the prior year, is primarily due to the timing of fuel cost and rider recoveries from utility customers. This is a regulated utility issue, not a core operational failure. The company is actively funding its future growth, as evidenced by the heavy capital spending in its investing activities, which aligns with its Mission Statement, Vision, & Core Values of Otter Tail Corporation (OTTR).

Potential Liquidity Strengths

Otter Tail Corporation's most significant liquidity strength is its total available liquidity, which stood at a massive $705.3 million as of September 30, 2025. This includes $325.8 million in available cash and cash equivalents, plus available capacity under its credit facilities. This large cash cushion and access to credit provides a substantial safety net against unexpected capital needs or market volatility. They have a ton of readily available cash.

Valuation Analysis

Otter Tail Corporation (OTTR) appears fairly valued to slightly undervalued based on a blend of 2025 fiscal year estimates and current market price, suggesting a moderate buy opportunity for long-term, utility-focused investors. The consensus price target of $83.00 implies a modest upside from the current price of $81.96 as of November 2025.

The company's valuation multiples reflect a stable, diversified utility business that has seen strong non-electric segment performance, but the forward-looking metrics suggest a slight premium to its historical trailing price. For the 2025 fiscal year, Otter Tail Corporation increased its diluted earnings per share (EPS) guidance midpoint to $6.47, which is a key anchor for our forward-looking analysis.

Here's the quick math on key valuation ratios using the November 2025 closing price of $81.96:

• Price-to-Earnings (P/E): The forward P/E ratio stands at 13.44, compared to a trailing P/E of 12.33. This is a reasonable multiple for a utility with a strong non-electric component.
• Price-to-Book (P/B): The P/B ratio is 1.88. For a capital-intensive utility, this multiple indicates investors are willing to pay almost twice the book value of assets, which is a vote of confidence in management and asset quality.
• Enterprise Value-to-EBITDA (EV/EBITDA): The EV/EBITDA ratio is 8.86. This is a clean one-liner on how much debt-adjusted cash flow the market is buying.

What this estimate hides is the segment mix; the non-electric segments (Manufacturing and Plastics) have been driving outsized earnings, but the long-term expectation is for the Electric segment to take up a larger share of earnings, which typically commands a lower, more stable multiple.

Stock Performance and Analyst Outlook

Otter Tail Corporation's stock price has shown resilience but has delivered a negative total return of -1.1% over the last 12 months, which is a bit disappointing for a utility stock known for stability. The stock traded in a range, hitting a 52-week high of $86.22 in August 2025 and a 52-week low of $71.66 in January 2025.

The analyst community views the stock favorably, with an average rating of Moderate Buy. The consensus target price is $83.00, suggesting a small but tangible upside. This outlook is supported by Otter Tail Corporation's capital spending plan of $1.9 billion over the next five years, which is aimed at achieving a 10% compounded annual growth rate in its rate base, providing a clear path for future utility earnings growth.

The dividend profile remains attractive for income investors. The company has declared a quarterly common stock dividend of $0.525 per share, translating to an annual dividend of $2.10. This results in a trailing twelve-month dividend yield of 3.09%. The forward payout ratio, based on the 2025 EPS midpoint, is approximately 32.46%, which is defintely sustainable and leaves ample room for both capital investment and future dividend increases.

For a deeper dive into who is buying and why, you should check out Exploring Otter Tail Corporation (OTTR) Investor Profile: Who's Buying and Why?

Next Step: Finance should model a scenario where the Plastics segment's margin reverts to its long-term average to stress-test the 2026 EPS outlook by the end of the month.

Risk Factors

You need to look past Otter Tail Corporation's (OTTR) strong, diversified performance and focus on the core risks that could slow its momentum. The biggest near-term challenges are regulatory lag in the Electric segment and a cyclical downturn hitting the Manufacturing business right now.

Honestly, a diversified utility and manufacturing conglomerate (a business with multiple, unrelated divisions) is a double-edged sword. It smooths out the market's bumps, but it also means you're fighting multiple, distinct battles at once. The company's latest full-year 2025 diluted earnings per share (EPS) guidance is strong, set between $6.32 and $6.62, with a midpoint of $6.47, but that confidence hides some segment-specific stress points.

Operational and Segment-Specific Risks

The operational risks are clear when you break down the segments. For 2025, the expected earnings mix is heavily weighted toward the non-utility side, with approximately 36% from the Electric segment and 64% from the Manufacturing and Plastics segments. This deviation from the long-term target of 65% Electric/35% Non-Electric means the company is currently more exposed to industrial cycles.

The Manufacturing segment is defintely the weak link right now. In the third quarter of 2025, operating revenues for Manufacturing fell by 3.7%, driven by an 8% decrease in sales volumes. This is due to soft end-market demand in areas like recreational vehicles, lawn and garden equipment, and agriculture, which is a direct hit from the challenging macroeconomic backdrop and higher interest rates.

The Plastics segment, while a significant profit driver, faces a different kind of pressure: pricing. In Q3 2025, sales prices saw a 17% year-over-year decline, though lower PVC resin costs and increased production capacity helped keep net income strong.

• Manufacturing Slump: Sales volumes are down due to weak industrial demand.
• Plastics Pricing: Sales prices fell 17% in Q3 2025, squeezing margins.
• Rising Debt Cost: Interest expenses grew to $11.7 million in Q2 2025, up from $10.2 million in Q2 2024, due to higher borrowing costs.

Regulatory and Financial Headwinds

The Electric segment, which is the long-term growth engine, faces a key strategic risk: regulatory lag. The company is investing heavily-they have a new five-year capital spending plan totaling $1.9 billion for the Electric segment-to achieve a 10% compounded annual growth rate (CAGR) in its rate base. But, this massive capital outlay only translates into earnings when regulators approve the rate increases needed to recover those costs.

Any delays in getting approval for rate recovery mechanisms, like the recent request to increase electric rates in Minnesota, could cause earnings recovery to lag behind the large capital expenditures. This is a classic utility risk. Also, the company's long-term debt has climbed to $1.043 billion as of Q2 2025, up from $943 million at the end of 2024, which amplifies the impact of higher interest rates on their investment pipeline.

Here's a quick look at the core financial risks and the company's buffer:

Other external risks are the standard utility boilerplate but still matter: extreme weather events, cybersecurity threats, and the impact of climate change legislation on their generation fleet. You can dive deeper into the company's strategic positioning by Exploring Otter Tail Corporation (OTTR) Investor Profile: Who's Buying and Why?

Growth Opportunities

You want to know where the next dollar of growth comes from at Otter Tail Corporation (OTTR), and the answer is clear: it's a dual-engine approach, driven by massive utility infrastructure investment and strategic capacity expansion in the non-electric businesses. The company's updated 2025 diluted earnings per share (EPS) guidance is strong, sitting at a range of $6.32 to $6.62, with a midpoint of $6.47. That's a defintely solid outlook for a diversified utility.

The core of the long-term growth story is the Electric segment's capital plan. Otter Tail Power has introduced a new five-year capital spending plan totaling $1.9 billion, which is expected to produce a rate base Compound Annual Growth Rate (CAGR) of 10%. This is what we call a high-quality growth driver because the company has a strong track record of converting this rate base growth into EPS growth near a one-to-one ratio. They are targeting a long-term EPS growth rate of 7% to 9% from a 2028 base year. That's a great return profile.

Here's a quick look at the key growth drivers across the segments:

• Electric Utility: Investing in renewable generation and grid modernization. Key projects include two new solar facilities totaling 345 MW and nearing completion of the Wind Repowering project. This aligns with the push for clean energy and system reliability.
• Plastics: Expanding capacity to capture market share. The second phase of the Vinyltech expansion is on track to add an additional 26 million pounds of capacity early next year, boosting total production capacity by 15%.
• Manufacturing: Positioning for a market upswing. The new BTD Georgia facility is currently ramping up to full production capability, ready to serve customers in the Southeast once end-market demand improves.

The competitive advantage for Otter Tail Corporation is two-fold. First, the Electric segment is a low-cost provider, with 2024 rates running 16% below the regional average and 30% below the national average. This low-cost structure is a major draw for large industrial customers, like data centers, looking for reliable and affordable power. Second, the diversified structure allows the high cash flow from the Plastics segment-which is expected to account for a significant portion of the 2025 earnings mix-to help fund the regulated utility's capital expenditures. For 2025, the earnings mix is expected to be approximately 36% from Electric and 64% from the Manufacturing and Plastics segments.

To be fair, the Plastics segment earnings are expected to normalize over time as PVC pipe prices recede, which is why the long-term target is a 65% Electric and 35% Non-Electric mix by 2028. But right now, that non-electric cash flow is a powerful asset. You can read more about the company's financial structure in Breaking Down Otter Tail Corporation (OTTR) Financial Health: Key Insights for Investors.

Here's the quick math on the capital plan's impact:

What this estimate hides is the risk of regulatory lag on rate cases, but management is actively working on new filings, including a requested net revenue increase of $44.8 million in Minnesota, to mitigate that. The strategy is clearly focused on internal, regulated growth, which means less reliance on volatile mergers and acquisitions (M&A) for expansion.