MDU Resources Q2 2026 earnings: Utility gains lift net income 55.5%

MDU Resources Group (NYSE: MDU) reported second-quarter 2026 operating revenue of $375.2 million, up approximately 6.8% from $351.2 million, while diluted EPS increased 42.9% to $0.10 from $0.07. Net income rose 55.5% to $21.3 million as electric utility earnings increased and the natural gas distribution business narrowed its seasonal loss, partly offset by lower pipeline earnings and higher interest expense.

Core financial results

For the quarter ended June 30, revenue increased by $24.0 million while operating expenses rose by only $6.5 million. That widened operating income to $47.9 million and lifted operating margin by approximately 4.1 percentage points.

The headline increase in net income also included a favorable change in discontinued operations, which contributed $2.0 million compared with a $0.4 million loss a year earlier. Income from continuing operations increased at a slower—but still meaningful—rate of approximately 36.9%.

Business and segment performance

The regulated utility businesses produced the quarter’s earnings improvement. Electric utility revenue and profit increased, while natural gas distribution reduced its normal seasonal loss. Pipeline revenue was nearly unchanged, but earnings declined because of lower other income and higher depreciation.

Electric utility

Electric retail sales volumes increased 8.2%, with growth across the major customer classes and an additional contribution from data center demand. Badger Wind Farm contributed $3.3 million to quarterly earnings, while interim rates in Montana and new rates in Wyoming also supported results.

These benefits were partly offset by higher interest expense associated with debt issued for capital investments, as well as higher depreciation and operating costs, including expenses related to Badger Wind Farm.

MDU also entered an electric service agreement with Applied Digital for the proposed Polaris Forge 3 AI facility in North Dakota. The campus would require 430 megawatts at full capacity, but the agreement and related filings remain subject to regulatory approval.

Natural gas distribution

The segment’s seasonal loss narrowed by $3.5 million. New rates in Idaho, Washington, Montana and Wyoming, a 6.7% increase in retail sales volumes and 1.6% customer growth drove the improvement. Higher interest expense associated with increased long-term debt balances absorbed part of those gains.

Pipeline

Pipeline revenue edged higher as demand for short-term transportation contracts and interruptible storage services continued. However, lower other income and higher depreciation from a growth project placed in service reduced segment net income by $1.0 million.

The proposed Bakken East Pipeline remains the main long-term project. MDU has signed precedent agreements covering nearly 1.2 billion cubic feet per day of firm transportation capacity and continues to design the system for 1.4 billion cubic feet per day. A final investment decision is expected before the planned FERC application, now anticipated in the fourth quarter of 2026.

The project’s estimated cost is $2.7 billion to $3.2 billion, with Phase One targeted for late 2029 and Phase Two for late 2030. MDU continues to evaluate financing and partnership alternatives. Separately, the Line Section 32 Expansion remains targeted for service in late 2028, subject to regulatory approvals.

Profitability, cash flow and balance sheet

Although quarterly operating profitability improved, financing costs continued to rise. Interest expense increased to $31.5 million from $25.4 million, an increase of approximately 24%, reflecting higher debt balances used to fund capital investments.

Cash-flow figures were provided for the six months ended June 30 rather than for the quarter alone. Operating cash flow declined year over year, while investing cash outflows and total debt increased.

MDU estimates 2026 capital expenditures of $529 million and a total of $3.077 billion from 2026 through 2030. Those figures exclude investment in the proposed Bakken East Pipeline, making project financing an important consideration beyond the existing capital program.

Utility gains are expanding earnings, but funding costs are also rising

The quarter shows the intended earnings effect of regulated infrastructure investment: Badger Wind Farm recovery, new rates and higher customer volumes helped operating income grow substantially faster than revenue. The natural gas distribution business also benefited as approved rates and volume growth improved the economics of its seasonally weaker quarter.

At the same time, total debt increased by $395 million from a year earlier and quarterly interest expense rose by $6.1 million. That financing burden already offset part of the utility gains, and the proposed Bakken East project would require additional capital beyond MDU’s existing five-year spending plan. The balance between earnings generated by new infrastructure and the cost of financing it will therefore remain central to future results.

Guidance

MDU reaffirmed its 2026 diluted EPS guidance rather than raising or lowering the range. The outlook assumes normal weather and operating conditions, continued customer growth, execution of approved capital programs and constructive regulatory outcomes.

Recent insider transaction

The supplied transaction details identify one purchase by a director during the six months preceding the report date. The transaction is presented without drawing conclusions about the insider’s view of the company.

More recent reported transactions consisted of stock awards rather than purchases or sales.

Risks investors should watch

• Regulatory outcomes: Several rate cases, settlements and customer agreements remain pending. Montana interim rates and proposed FERC pipeline rates may also be subject to refunds, which could affect recognized revenue and earnings.
• Higher debt and interest expense: Debt increased to $2.577 billion and quarterly interest expense rose approximately 24%. Additional borrowing could absorb more of the earnings generated by new infrastructure.
• Bakken East execution and financing: The project has not reached a final investment decision, still requires a FERC application and is expected to cost $2.7 billion to $3.2 billion outside the existing capital plan. Timing, final contracted volumes and financing structure remain important variables.
• Dependence on operating assumptions: The reaffirmed guidance assumes normal weather, continued customer growth, successful capital-plan execution and constructive regulatory decisions. Changes in these conditions could affect the annual outcome.

Summary

MDU Resources’ second-quarter improvement was driven mainly by regulated utility operations, including new rates, Badger Wind Farm recovery and higher retail volumes. Those gains expanded operating margin and outweighed a modest decline in pipeline earnings, although higher interest expense and weaker six-month operating cash flow show the cost of the company’s capital-intensive growth strategy. Investors’ next focus will be regulatory decisions, financing for Bakken East and whether utility earnings continue to outpace rising depreciation and interest costs.