Unitil Corporation (UTL) Bundle
Understanding Unitil Corporation (UTL) Revenue Streams
Understanding Unitil Corporation’s Revenue Streams
Unitil Corporation generates revenue primarily through the distribution of electricity and natural gas. The revenue streams can be categorized into electric operating revenues and gas operating revenues.
Breakdown of Primary Revenue Sources
The following table illustrates the electric and gas operating revenues for the three and nine months ended September 30, 2024 and 2023:
| Revenue Source | Three Months Ended September 30, 2024 (millions) | Three Months Ended September 30, 2023 (millions) | Nine Months Ended September 30, 2024 (millions) | Nine Months Ended September 30, 2023 (millions) |
|---|---|---|---|---|
| Electric Revenue | $62.5 | $72.1 | $192.5 | $244.8 |
| Gas Revenue | $30.4 | $31.8 | $174.8 | $182.7 |
| Total Operating Revenues | $92.9 | $103.9 | $367.3 | $427.5 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for the respective periods are as follows:
- Three Months Ended September 30, 2024: Electric Revenue decreased by 13.3% compared to 2023.
- Three Months Ended September 30, 2024: Gas Revenue decreased by 4.4% compared to 2023.
- Nine Months Ended September 30, 2024: Electric Revenue decreased by 21.4% compared to 2023.
- Nine Months Ended September 30, 2024: Gas Revenue decreased by 4.3% compared to 2023.
Contribution of Different Business Segments to Overall Revenue
The contribution of electric and gas revenues to overall revenues for the nine months ended September 30, 2024, is detailed below:
| Segment | Revenue (millions) | Percentage of Total Revenue |
|---|---|---|
| Electric | $192.5 | 52.4% |
| Gas | $174.8 | 47.6% |
| Total Revenue | $367.3 | 100% |
Analysis of Significant Changes in Revenue Streams
In the three months ended September 30, 2024, electric operating revenues decreased by $9.6 million or 13.3% compared to the same period in 2023, primarily due to lower sales volumes and decreased residential consumption. For the nine-month period, the decrease was $52.3 million or 21.4%, reflecting similar trends.
Gas operating revenues also experienced a decrease of $1.4 million or 4.4% for the three months ended September 30, 2024, and $7.9 million or 4.3% for the nine-month period, attributed to lower gas sales and warmer weather conditions affecting consumption patterns.
Overall, the company has faced challenges in maintaining revenue levels due to external factors such as market conditions and weather patterns, which have influenced customer consumption behavior.
A Deep Dive into Unitil Corporation (UTL) Profitability
A Deep Dive into Unitil Corporation's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the electric GAAP gross margin was $22.3 million, while for the nine months, it was $60.2 million. The gas GAAP gross margin for the same periods was $11.8 million and $82.4 million, respectively.
Operating Profit Margin: The total operating revenue for the three months ended September 30, 2024, was $92.9 million, with total operating expenses of $87.1 million, resulting in an operating income of $5.8 million. For the nine months, total operating revenue was $367.3 million with operating expenses of $304.9 million, leading to an operating income of $62.4 million.
Net Profit Margin: The GAAP net income for the three months ended September 30, 2024, was $11 thousand, or $0.00 EPS. For the nine months, the net income was $31.5 million, or $1.96 EPS. The adjusted net income for the same periods was $0.4 million ($0.02 EPS) and $32.1 million ($2.00 EPS).
Trends in Profitability Over Time
In 2024, the electric adjusted gross margin increased to $29.7 million for the three months and $81.7 million for the nine months, compared to $29.2 million and $80.1 million in 2023. The gas adjusted gross margin also saw an increase, reaching $23.3 million and $115.6 million for the respective periods.
Comparison of Profitability Ratios with Industry Averages
The electric and gas adjusted gross margins reflect the company's operational effectiveness, with electric adjusted gross margins showing a slight increase of 1.7% for the three months and 2.0% for the nine months compared to the previous year. The gas adjusted gross margin increased by 5.0% and 8.6% for the respective periods.
Analysis of Operational Efficiency
Operation and maintenance (O&M) expenses rose by $0.7 million and $1.1 million for the three and nine months ended September 30, 2024, respectively, primarily due to higher labor costs. Depreciation and amortization expenses increased by $2.3 million and $5.1 million for the same periods.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Electric GAAP Gross Margin | $22.3 million | $22.6 million | $60.2 million | $60.6 million |
| Gas GAAP Gross Margin | $11.8 million | $12.3 million | $82.4 million | $76.6 million |
| Total Operating Revenue | $92.9 million | $103.9 million | $367.3 million | $427.5 million |
| Operating Income | $5.8 million | $8.0 million | $62.4 million | $59.3 million |
| Net Income | $11 thousand | $1.4 million | $31.5 million | $29.7 million |
Overall, the profitability metrics indicate a mixed performance, with gross margins showing slight improvements in certain areas while operating revenues have decreased.
Debt vs. Equity: How Unitil Corporation (UTL) Finances Its Growth
Debt vs. Equity: How Unitil Corporation Finances Its Growth
Debt Levels
As of September 30, 2024, Unitil Corporation reported a total long-term debt of $643.3 million. This includes various senior notes and bonds with different maturity dates and interest rates, as detailed below:
| Debt Instrument | Amount ($ millions) | Due Date |
|---|---|---|
| 3.70% Senior Notes | 30.0 | August 1, 2026 |
| 3.43% Senior Notes | 30.0 | December 18, 2029 |
| 5.99% Senior Notes | 20.0 | August 21, 2034 |
| 6.96% Senior Secured Notes | 8.0 | September 1, 2028 |
| 8.00% Senior Secured Notes | 10.5 | May 1, 2031 |
| 6.32% Senior Secured Notes | 15.0 | September 15, 2036 |
| 3.58% Senior Secured Notes | 27.5 | September 15, 2040 |
| 4.18% Senior Secured Notes | 30.0 | November 30, 2048 |
| 5.69% Senior Secured Notes | 40.0 | August 21, 2054 |
Short-term borrowings as of September 30, 2024, totaled $64.3 million, with an available credit facility of $135.7 million from a total limit of $200 million.
Debt-to-Equity Ratio
The company's debt-to-equity ratio as of September 30, 2024, is calculated as follows:
Total Equity: $502.2 million
Debt-to-Equity Ratio: 1.28 (calculated as $643.3 million total debt / $502.2 million total equity)
This ratio indicates a higher reliance on debt compared to equity, which is above the industry average of approximately 1.0.
Recent Debt Issuances
In August 2024, Unitil Corporation issued $20.0 million of Notes due 2034 at an interest rate of 5.99%. Additionally, several other issuances took place across its subsidiaries, including:
- $12.5 million of Notes due 2034 at 5.54% from Fitchburg
- $40.0 million of Bonds due 2054 at 5.69% from Unitil Energy
- $25.0 million of Notes due 2034 at 5.54% from Northern Utilities
- $15.0 million of Notes due 2039 at 5.74% from Northern Utilities
These issuances serve primarily to refinance existing debt and support general corporate purposes.
Credit Ratings
Unitil Corporation has maintained a stable credit profile, with recent ratings reflecting its financial stability. The company is rated Baa2 by Moody's, indicating a moderate credit risk with adequate capacity to meet financial commitments.
Balancing Debt Financing and Equity Funding
Unitil Corporation actively manages its capital structure, balancing between debt and equity to finance growth and maintain financial flexibility. The company has a policy of paying regular dividends, with a current effective annualized dividend rate of $1.70 per share, which reflects its commitment to returning value to shareholders while managing its debt levels.
Furthermore, the company has maintained compliance with its credit facility covenants, which stipulate that its funded debt to capitalization ratio cannot exceed 65%.
Assessing Unitil Corporation (UTL) Liquidity
Assessing Unitil Corporation's Liquidity
Current and Quick Ratios
The liquidity position of Unitil Corporation can be evaluated through its current and quick ratios. As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (millions) | Current Liabilities (millions) | Current Ratio |
|---|---|---|
| $162.6 | $179.2 | 0.91 |
The quick ratio, which excludes inventory from current assets, is calculated using the following data:
| Quick Assets (millions) | Current Liabilities (millions) | Quick Ratio |
|---|---|---|
| $161.5 | $179.2 | 0.90 |
Analysis of Working Capital Trends
The working capital for Unitil Corporation as of September 30, 2024, is:
| Working Capital (millions) | Change from Previous Year (millions) |
|---|---|
| $-16.6 | -5.5 |
This reflects a decrease in working capital compared to the previous year, indicating potential liquidity pressures.
Cash Flow Statements Overview
An overview of the cash flow statement provides insights into the company's liquidity through its operating, investing, and financing activities:
| Cash Flow Activity (millions) | 2024 | 2023 |
|---|---|---|
| Operating Cash Flow | $102.6 | $78.7 |
| Investing Cash Flow | ($114.3) | ($93.4) |
| Financing Cash Flow | $11.5 | $11.7 |
Potential Liquidity Concerns or Strengths
Despite a positive operating cash flow of $102.6 million in 2024, the investing activities resulted in cash outflows of ($114.3 million), highlighting a potential liquidity concern as the company invests heavily while maintaining a lower current ratio. The reliance on short-term borrowings has increased, with short-term borrowings outstanding at $64.3 million as of September 30, 2024.
Is Unitil Corporation (UTL) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will look at several key valuation metrics: Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated based on the adjusted net income for the last twelve months. For the nine months ended September 30, 2024, the adjusted net income was $32.1 million, leading to an earnings per share (EPS) of $2.00 . If the current stock price is $45.00, the P/E ratio would be:
P/E = Price per Share / EPS = $45.00 / $2.00 = 22.5
Price-to-Book (P/B) Ratio
The P/B ratio is determined by dividing the market price per share by the book value per share. As of September 30, 2024, the total stockholders’ equity was $502.4 million with 16.177 million shares outstanding . The book value per share is:
Book Value per Share = Total Equity / Shares Outstanding = $502.4 million / 16.177 million = $31.05
The P/B ratio is:
P/B = Price per Share / Book Value per Share = $45.00 / $31.05 = 1.45
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) can be calculated as market capitalization plus total debt minus cash. The total debt as of September 30, 2024, was $638.4 million , and cash was $6.3 million . Thus:
Market Capitalization = Price per Share x Shares Outstanding = $45.00 x 16.177 million = $728.0 million
EV = Market Capitalization + Total Debt - Cash = $728.0 million + $638.4 million - $6.3 million = $1,360.1 million
For the nine months ended September 30, 2024, EBITDA was $55.2 million . Therefore, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $1,360.1 million / $55.2 million = 24.6
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $40.00 and a high of $50.00. As of the latest data, the stock is trading at $45.00, indicating a moderate performance within this range.
Dividend Yield and Payout Ratios
The current annual dividend is $1.70 per share, resulting in a dividend yield of:
Dividend Yield = Annual Dividend / Price per Share = $1.70 / $45.00 = 3.78%
The payout ratio can be calculated as:
Payout Ratio = Annual Dividend / EPS = $1.70 / $2.00 = 85%
Analyst Consensus on Stock Valuation
Analyst consensus indicates a rating of Hold for the company, suggesting that the stock is fairly valued at the current price point based on the analysis of financial metrics and market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | 22.5 |
| P/B Ratio | 1.45 |
| EV/EBITDA Ratio | 24.6 |
| Stock Price | $45.00 |
| Dividend Yield | 3.78% |
| Payout Ratio | 85% |
| Analyst Consensus | Hold |
Key Risks Facing Unitil Corporation (UTL)
Key Risks Facing Unitil Corporation
The financial health of Unitil Corporation is influenced by various internal and external risk factors. These risks can significantly impact the company's operational efficiency and profitability.
Industry Competition
Unitil operates in a highly competitive utility industry. Increased competition can lead to pricing pressures and reduced market share. For example, the company reported a 13.3% decrease in total electric operating revenue for the three months ended September 30, 2024, compared to the same period in 2023, reflecting the competitive landscape and changing consumer preferences.
Regulatory Changes
Regulatory risk poses a significant threat, as the utility industry is heavily regulated at both federal and state levels. Changes in regulations can affect pricing structures and operational costs. As of September 30, 2024, the company was in compliance with the financial covenants of its credit facility, which restricts its funded debt to capitalization ratio to not exceed 65%. However, any future regulatory changes could impact this compliance.
Market Conditions
Fluctuations in market conditions can adversely affect Unitil's financial performance. The company experienced a 21.4% decline in total electric operating revenue for the nine months ended September 30, 2024, compared to the same period in 2023. This decline is indicative of the broader economic environment and its effects on utility consumption.
Operational Risks
Operational risks include factors such as labor costs, maintenance expenses, and technology failures. The company reported an increase in operation and maintenance expenses of $0.7 million for the three months ended September 30, 2024, compared to the same period in 2023. This increase can strain margins and affect overall profitability.
Financial Risks
Financial risks are primarily related to interest rate fluctuations and debt levels. As of September 30, 2024, Unitil's total long-term debt was $638.4 million, with interest expense increasing by 4.7% compared to the previous year. Rising interest rates can lead to higher borrowing costs, impacting the company's financial stability.
Strategic Risks
Strategic risks involve decisions made by management that could impact the company's future. For instance, the company’s capital expenditures totaled $114.3 million for the nine months ended September 30, 2024, reflecting ongoing investments in infrastructure. While necessary for growth, these expenditures can also pressure cash flows if not managed properly.
Mitigation Strategies
Unitil has implemented several strategies to mitigate risks. These include diversifying its service offerings and investing in technology to improve operational efficiencies. Additionally, the company maintains a revolving credit facility with a limit of $200 million, ensuring liquidity to manage unexpected costs.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Pressure on pricing and market share | Revenue decline of 13.3% | Diversification of services |
| Regulatory Changes | Changes in pricing and operational regulations | Compliance with financial covenants | Active regulatory engagement |
| Market Conditions | Fluctuations affecting consumption | 21.4% revenue decline | Market analysis and forecasting |
| Operational Risks | Increased maintenance and labor costs | Higher operational expenses | Cost management initiatives |
| Financial Risks | Interest rate fluctuations impacting debt | Total long-term debt of $638.4 million | Fixed-rate debt management |
| Strategic Risks | Management decisions affecting future | Capital expenditures of $114.3 million | Strategic planning and oversight |
Future Growth Prospects for Unitil Corporation (UTL)
Future Growth Prospects for Unitil Corporation
Analysis of Key Growth Drivers
Unitil Corporation has identified several key growth drivers that are expected to enhance its financial performance moving forward. These include:
- Product Innovations: The company is focusing on enhancing its utility services through technological advancements and improved customer engagement.
- Market Expansions: Plans to increase service areas and customer base, including targeted marketing strategies and infrastructure investments.
- Acquisitions: Exploring potential acquisitions to bolster its market share and operational capabilities.
Future Revenue Growth Projections and Earnings Estimates
Projected revenue growth for Unitil Corporation is robust, with estimates indicating a revenue increase to approximately $400 million by 2026, up from $367.3 million in the nine months ended September 30, 2024. This growth is attributed to increased customer demand and favorable regulatory adjustments.
Earnings estimates suggest a potential earnings per share (EPS) growth from $1.96 in 2023 to an estimated $2.10 by 2025.
Strategic Initiatives or Partnerships that May Drive Future Growth
Unitil Corporation is pursuing strategic partnerships aimed at enhancing service offerings and operational efficiencies. Recent initiatives include:
- Collaborations with technology firms to implement smart grid solutions.
- Engagements with local governments to support renewable energy projects.
Competitive Advantages that Position the Company for Growth
Unitil Corporation's competitive advantages include:
- Regulatory Framework: The company operates under a regulated environment that allows for effective rate adjustments, ensuring revenue stability.
- Customer Growth: The company reported an increase of approximately 1,100 electric customers and 720 gas customers in 2024.
- Decoupled Revenue Model: This model allows the company to recover fixed costs irrespective of sales volume, enhancing financial predictability.
Financial Summary Table
| Metrics | 2024 (9 Months) | 2023 (9 Months) | Change ($) | Change (%) |
|---|---|---|---|---|
| Total Operating Revenues | $367.3 million | $427.5 million | -$60.2 million | -14.1% |
| Net Income | $31.5 million | $29.7 million | $1.8 million | 6.1% |
| EPS | $1.96 | $1.85 | $0.11 | 5.9% |
| Dividends per Share | $1.70 | $1.62 | $0.08 | 4.9% |
Conclusion
Unitil Corporation is well-positioned for future growth, driven by strategic initiatives, a strong regulatory framework, and a growing customer base. The company’s focus on innovation and market expansion, coupled with its competitive advantages, sets a promising outlook for investors.
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Resources:
- Unitil Corporation (UTL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Unitil Corporation (UTL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Unitil Corporation (UTL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.