Otter Tail Corporation Reports 2025 Results, Sets 2026 Guidance
Otter Tail Corporation, reported financial results for the quarter and full year ended December 31, 2025, highlighting strong annual earnings, solid returns, and continued investment in utility infrastructure and manufacturing operations. The company also introduced its 2026 earnings guidance and reaffirmed its long-term growth targets.
Full-Year 2025 Performance Highlights
For 2025, Otter Tail delivered diluted earnings per share (EPS) of $6.55, surpassing expectations for the year. The company reported a consolidated return on equity (ROE) of 16% with an equity ratio of 63%, reflecting strong financial discipline and performance across its business segments.
Looking ahead, the company initiated 2026 EPS guidance of $5.22 to $5.62, with a projected ROE of approximately 12% at the midpoint. Management reiterated its long-term financial targets, including 7–9% annual EPS growth and 10–12% total shareholder returns.
President and CEO Chuck MacFarlane credited the results to the efforts of employees across the company, noting that the business performed well despite dynamic market conditions. He emphasized the company’s progress on major capital projects, regulatory filings, and operational initiatives throughout the year.
Electric Segment Drives Growth
Otter Tail’s Electric segment continued to serve as a core earnings driver. In 2025:
- Operating revenues: $566.8 million, up 8.1% year over year
- Net income: $97.6 million, up 7.3%
- Retail energy sales: Increased 4.2%
The growth was largely attributed to higher fuel recovery revenues, increased customer demand, favorable weather, and recovery of rate base investments. Lower operating and maintenance expenses also contributed to improved profitability, although these gains were partially offset by higher depreciation, interest costs, and pension-related adjustments.
The company advanced several capital projects during the year, including wind repowering, solar developments, and regional transmission initiatives. It also filed rate cases in South Dakota and Minnesota for the first time in several years, with management noting that even with proposed increases, customer rates would remain among the lowest in the region.
Manufacturing Segment Faces Soft Demand
The Manufacturing segment experienced softer end-market conditions throughout much of 2025, particularly in agriculture, lawn and garden, and recreational vehicle markets.
- Operating revenues: $314.5 million, down 8.2%
- Net income: $11.5 million, down 15.8%
Sales volumes declined 6% as customers reduced inventories, a trend that began in late 2024. However, improved production efficiencies and cost-control measures helped offset part of the earnings impact. By the fourth quarter, customer order activity began to recover, allowing the segment to end the year with improving momentum.
Plastics Segment Remains Strong Despite Price Declines
The Plastics segment continued to generate significant earnings, though results declined from record levels seen in prior periods.
- Operating revenues: $422.8 million, down 8.8%
- Net income: $170.4 million, down 15.1%
The decrease was mainly driven by a 15% drop in average sales prices following peak levels in late 2022. This was partially offset by:
- An 8% increase in sales volumes
- Expanded production capacity at the Vinyltech facility
- Lower input costs, including PVC resin
Management expects to complete the second phase of the Vinyltech expansion in early 2026.
Cash Flow and Liquidity Position
Operating cash flow for 2025 totaled $386.0 million, down from $452.7 million in 2024, primarily due to higher working capital needs and lower earnings.
Key financial activities during the year included:
- $288.1 million in capital expenditures, mainly in the Electric segment
- $100 million in long-term debt issuance to support capital investments and operations
- $88.1 million in dividend payments
As of December 31, 2025, Otter Tail reported total available liquidity of $705.5 million, including cash and credit facility availability.
Fourth-Quarter 2025 Results
For the fourth quarter:
- Operating revenues: $308.1 million, up 1.6%
- Net income: $51.8 million, down 5.6%
- Diluted EPS: $1.23, compared with $1.30 in Q4 2024
Electric segment earnings rose due to higher sales and lower maintenance expenses, while Manufacturing returned to profitability as customers replenished inventories. Plastics earnings declined due to lower product prices, partially offset by reduced input costs and higher volumes.
2026 Outlook and Segment Expectations
Otter Tail expects 2026 EPS between $5.22 and $5.62, reflecting changes in segment performance:
Electric Segment
- Expected earnings increase of about 14%
- Driven by a 14% rise in average rate base
- Benefits from rate case outcomes and capital investments
- Offset by higher labor, outage, depreciation, and financing costs
Manufacturing Segment
- Anticipated earnings growth of about 7%
- Modest sales volume improvement
- Productivity gains partially offset by inflation
Plastics Segment
- Projected earnings decline of about 36%
- Continued reduction in product sales prices
- Higher volumes from new capacity
- Flat raw material costs expected
The company expects its 2026 earnings mix to be roughly 49% Electric and 51% non-Electric, compared with its long-term target of 70% Electric and 30% non-Electric.
Capital Investment Plan Through 2030
Otter Tail outlined a five-year capital expenditure plan totaling approximately $2.05 billion from 2026 through 2030.
Major investments include:
- Renewable generation and battery storage
- Transmission infrastructure
- Distribution upgrades
- Reliability and technology improvements
The plan is expected to drive a 10% compound annual growth rate in average rate base over the next five years, supporting long-term earnings growth in the Electric segment.
Long-Term Strategy
Management emphasized that the company’s diversified portfolio across utility, manufacturing, and plastics operations continues to provide resilience across economic cycles. With strong capital plans, improving manufacturing demand, and sustained contributions from the plastics business, the company remains confident in its growth trajectory.
Otter Tail reiterated its long-term goal of 7–9% annual EPS growth, translating to 10–12% total shareholder returns.
