Otter Tail Corporation delivered a clear third-quarter miss. Earnings of $1.41 per share fell 10.2% short of the $1.57 consensus and declined 24.2% from a year ago. Revenue of $320.51 million missed by 4.5% and slipped 1.6% year over year. Management affirmed the midpoint of its 2026 outlook and narrowed the range. The headline sounds steady, but the details are less reassuring. The segment guidance shows Plastics and Manufacturing expectations moving lower. An improved corporate cost line, rather than operating strength, absorbed those cuts. The tone was noticeably softer than in the second quarter, when guidance was raised.
The quarter carried no non-GAAP adjustments, so the $1.41 is a clean comparison against last year's $1.86. Plastics drove most of the damage. Segment net income fell 33.4% to $29.0 million on a 12.9% revenue decline. Average PVC pipe prices fell 9% and volumes fell 5%, while resin and other input costs rose 10%. That cost pressure is a sharp turn from earlier in the year, when input costs were falling. The call also flagged a one-time vendor rebate adjustment that added to the hit. Management had warned that customers pulled purchases forward into the second quarter ahead of resin price increases. Second-quarter volumes rose 15% on that pull-forward, and the third quarter absorbed the unwind. A softening housing market compounded the decline.
The secondary segments were also weaker beneath the surface. Manufacturing revenue rose 16.6% on 13% volume growth across construction, RV, lawn and garden, and industrial markets. Even so, segment net income fell 34.4% to $2.6 million. Inflation, higher SG&A, and productivity drag from onboarding new workers offset the volume gains. Management said it was "not satisfied" with the results, a reversal from a strong second quarter and a guidance raise. Electric net income was essentially flat at $27.4 million. That result came despite cooling degree days running 131% of normal, which added an estimated $0.04 per share versus last year. Electric operating and maintenance expense jumped to $50.2 million from $41.1 million, and the call attributed the increase partly to timing. Year-to-date electric earnings are up 14%, in line with the plan.
The revised outlook makes the quality question explicit. Adjusted Plastics guidance moved to $2.95-$3.11 from $2.97-$3.19, lowering the midpoint. Manufacturing narrowed to $0.32-$0.36 from $0.32-$0.38. Electric's midpoint was unchanged at $2.65. The corporate segment improved to a loss of $0.12-$0.16 from $0.18-$0.22, and that improvement preserved the consolidated $5.88 adjusted midpoint. GAAP guidance of $3.89-$4.19 still reflects the $103.5 million legal settlement booked earlier in the year.
The long-duration utility story improved at the margin, but it also picked up new friction. Management raised its incremental capex opportunity to $850 million from $750 million by potentially upsizing a wind project to 300MW from 200MW. Minnesota Commerce Department comments on the resource plan recommended more renewables and battery storage than the company requested. The 10% rate base growth target and $1.9 billion capex plan were reaffirmed, and the solar projects remain on schedule and on budget. Nine-month capex more than doubled to $451.6 million. Offsetting those positives, management warned that transmission siting difficulty could delay projects within the five-year plan. The company also trimmed its Minnesota rate case request again, to $38.7 million from $42.3 million, down from an original $44.8 million. The call offered no update on the 1,400MW large-load pipeline discussed last quarter. A revised capex plan is due in February.
Investor sentiment remained negative but improved, moving from -0.146 to -0.056 heading into the report. Shares stood at $91.51, up 3.7% since the open following the August report and about 3% above the 200-day moving average of $88.84. The stock had firmed modestly rather than broken down. Momentum and AVWAP trend readings are positive, while sequential growth remains negative. That mix fits a market leaning on the utility build-out while Plastics earnings keep shrinking.
The bottom line is that Otter Tail missed on both lines, and its unchanged guidance midpoint relies on a lower corporate cost line rather than operating strength. The utility growth story remains credible, and the capex opportunity is expanding. However, transmission delays, a smaller rate case ask, and a missing large-load update give bears legitimate ammunition. Plastics is still normalizing from peak pricing, and rising resin costs now compound that pressure. Whether the February capex update can offset that drag is the key question for the stock.