MDU Resources Group, Inc. (MDU) Cash Flow Statement

The extreme OCF/NI ratios, particularly the 12.46 in 2026Q2, are driven by large working capital inflows (e.g., $38.2M in 2026Q2) and seasonal patterns, not by core earnings quality. The gap between net income and operating cash flow is largely explained by D&A (averaging ~$50M per quarter) and regulatory timing, which is typical for utilities. Investors should focus on the cumulative OCF/NI over a full year, which appears closer to 1.5-2.0x, indicating reasonable cash conversion.

The negative FCF in 2025Q4 and 2025Q3 corresponds to elevated capex ($438.2M and $179.8M, respectively), likely tied to rate base investments. The positive FCF in 2026Q2, despite high capex, was supported by strong OCF of $265.3M, suggesting the company can fund its growth program without external pressure. However, the FCF margin of 19.1% in 2026Q2 is above the peer average, but this is seasonal and should be viewed with caution.

The elevated capex in Q4 2025 ($438.2M) and Q3 2025 ($179.8M) suggests a deliberate push to expand infrastructure, likely in the pipeline and electric segments. The depreciation expense of ~$50M per quarter is well below the average capex of ~$150M, implying that MDU is investing well above replacement levels, which may support future rate base growth. However, investors should monitor whether this capex translates into allowed returns, as regulatory lag could compress near-term cash flows.

The negative working capital in 2025Q4 likely reflects higher gas inventory and receivables during the heating season, while the positive changes in Q1 and Q2 indicate collections and inventory drawdowns. The $248K change in 2026Q1 is unusually small, suggesting a possible data anomaly or a shift in payment terms. Overall, working capital dynamics appear manageable, but the volatility in 2025Q4 (-$177.9M) warrants monitoring for potential cash flow strain.

The consistent dividend payout, despite volatile FCF, suggests management prioritizes income stability, which is typical for utilities. With no significant buybacks or acquisitions in the last 10 quarters, capital deployment is primarily directed toward capex and dividends. The $8.9M acquisition in 2024Q4 is minor, indicating a conservative M&A approach post-spin-off. Investors should watch if the dividend payout ratio rises as capex increases, potentially straining cash flow.

The cumulative OCF/NI ratio of 2.4x is high for a utility, but it is inflated by the large working capital inflows in 2026Q2 and 2025Q1. Excluding those, the ratio would be closer to 1.5x, which is still healthy. This gap may indicate that MDU is generating cash ahead of earnings recognition, possibly due to regulatory mechanisms that defer revenue. However, the sustainability of this divergence depends on future rate case outcomes and capex efficiency.