Otter Tail ((OTTR)) has held its Q2 earnings call. Read on for the main highlights of the call.

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Otter Tail’s latest earnings call struck a careful balance between confidence in its long‑term strategy and candor about near‑term pressures. Management highlighted progress on key projects, stronger manufacturing results and a raised earnings outlook, while acknowledging the sizeable legal settlement and ongoing pricing pressure in its Plastics business that will weigh on results for several years.

Guidance Raised and Clear Adjusted EPS Outlook

Otter Tail lifted its 2026 adjusted diluted EPS guidance to a range of $5.68 to $6.08, up from $5.22 to $5.62, signaling management’s confidence in core earnings power. The outlook explicitly excludes the after‑tax impact of the PVC pipe legal settlement, giving investors a cleaner view of underlying performance.

Strong Capital and Rate-Base Growth Plan

Management reaffirmed a robust 5‑year rate‑base CAGR of 10% and a $1.9 billion Otter Tail Power investment plan focused on customer needs. This supports a long‑term EPS growth target of 7% to 9% and total shareholder returns of 10% to 12%, underpinned by steady utility expansion.

Regulatory and Transmission Milestones

The company secured route permits for two MISO Tranche 1 345 kV transmission lines spanning nearly 200 miles, a key step for regional grid build‑out. Otter Tail also filed a 15‑year Integrated Resource Plan that lays out future gas and wind additions, with regulators expected to rule by mid‑2027.

Utility Project Execution and Renewables Progress

Two solar projects, Solway and Abercrombie, are moving through construction, with target in‑service dates in 2027 and 2028 respectively, along with a battery storage project also slated for 2028. Management emphasized disciplined execution to keep timelines and costs on track as these assets enter the rate base.

Manufacturing Segment Momentum

The Manufacturing segment delivered a 38% earnings increase, adding $0.03 per share, driven by better product mix and higher volumes in construction, RV and horticulture markets. Expanded capacity in Georgia is being effectively utilized, offering a diversified earnings counterweight to utility and plastics volatility.

Plastics Volume Strength and Operational Response

Plastics volumes rose 15% year‑over‑year, with Q2 pipe sales reaching a record level as Otter Tail leveraged expanded Phoenix‑area capacity. Sequential PVC price improvement from Q1 to Q2 showed some stabilization, even as pricing remains well below prior‑year levels.

Large Load Pipeline Expansion

The company’s large‑load pipeline grew by about 350 MW to roughly 1,400 MW, underscoring rising demand from new industrial and data‑center customers. Around 35% of this pipeline is tied to a data center, with the rest in clean fuels and thermal storage, supported by new large‑load tariffs filed across its service territory.

Balance Sheet and Liquidity Strength

Otter Tail highlighted a solid financial footing, with equity representing 60% of total capital and more than $600 million of available liquidity, including $278 million in cash. Management plans to retire $80 million of parent debt in the fourth quarter and fund growth without issuing new equity.

Quarterly Adjusted EPS Decline

Second‑quarter adjusted diluted EPS came in at $1.66, a 10% decline versus $1.85 a year earlier, reflecting the drag from weaker Plastics pricing and higher corporate expenses. Despite the drop, core operations remained resilient, helping support the raised multi‑year guidance.

Plastics Price Pressure and Earnings Impact

Average PVC pipe prices fell 14% year‑over‑year even as volumes climbed, pushing adjusted Plastics earnings down $0.14 per share, or 11%, in the quarter. The company now expects 2026 average sales prices to be roughly 15% below prior levels and projects Plastics earnings to decline through 2027, with 2028 targeted at $45 million to $50 million.

Significant Legal Settlement and Cash/Charge Impact

Otter Tail entered settlement agreements in U.S. PVC pipe antitrust litigation totaling $103.5 million, which were paid into escrow and drove a sizable after‑tax charge equivalent to $1.84 per share. While the settlement reduces future litigation risk, it materially affects reported earnings and restricts part of the company’s cash until funds are released.

Rising Corporate and Operating Costs

Corporate costs increased $0.07 per share, reflecting interim tax allocations and higher employee compensation, while electric O&M also climbed due to planned coal outages and vegetation work. Management additionally flagged expectations for lower investment income and reduced tax benefits linked to the litigation, further pressuring near‑term earnings.

Second-Half Volume and Pricing Uncertainty

After a strong volume quarter in Plastics, management anticipates softer sales in the second half as customers pulled forward purchases into Q2. Executives stressed that long‑term Plastics results are hard to predict in the current pricing environment, creating visibility challenges for investors.

Execution and Supply Chain Risks for New Generation

Otter Tail’s IRP includes a 50 MW gas unit in the early 2030s and two 50 MW wind projects later in the decade, but management cautioned on execution risks. Supply chain constraints for gas generation equipment could delay project timing and associated capital deployment, requiring careful planning.

Forward-Looking Guidance and Outlook

Looking ahead, Otter Tail expects Electric segment earnings to grow about 14% year‑over‑year, supported by its 10% rate‑base growth and $1.9 billion capital program. The company reiterated long‑term EPS growth of 7% to 9%, total shareholder returns of 10% to 12%, and projected customer bills rising 3% to 4% annually, even as Plastics earnings step down into the 2028 target range.

Otter Tail’s earnings call painted a story of a utility‑anchored company pressing ahead with grid, generation and manufacturing investments while managing through a tough plastics cycle and a sizable legal settlement. For investors, the message was that balance‑sheet strength and regulated growth should support the upgraded EPS trajectory, but Plastics volatility and cost pressures will remain key swing factors in the near term.