The Southern (NYSE:SO) and Pinnacle West Capital (NYSE:PNW) are both utilities companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, institutional ownership, risk, earnings, profitability, analyst recommendations and valuation.
Analyst Recommendations
This is a breakdown of recent ratings and target prices for The Southern and Pinnacle West Capital, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| The Southern | 3 | 2 | 9 | 0 | 2.43 |
| Pinnacle West Capital | 1 | 5 | 4 | 0 | 2.30 |
The Southern currently has a consensus target price of $64.8571, indicating a potential upside of 3.13%. Pinnacle West Capital has a consensus target price of $86.25, indicating a potential upside of 4.48%. Given Pinnacle West Capital's higher possible upside, analysts clearly believe Pinnacle West Capital is more favorable than The Southern.
Profitability
This table compares The Southern and Pinnacle West Capital's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| The Southern | 15.80% | 10.08% | 2.69% |
| Pinnacle West Capital | 18.03% | 11.16% | 3.33% |
Dividends
The Southern pays an annual dividend of $2.56 per share and has a dividend yield of 4.1%. Pinnacle West Capital pays an annual dividend of $3.32 per share and has a dividend yield of 4.0%. The Southern pays out 82.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Pinnacle West Capital pays out 69.6% of its earnings in the form of a dividend. The Southern has raised its dividend for 19 consecutive years and Pinnacle West Capital has raised its dividend for 9 consecutive years. The Southern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider and Institutional Ownership
57.6% of The Southern shares are owned by institutional investors. Comparatively, 82.8% of Pinnacle West Capital shares are owned by institutional investors. 0.4% of The Southern shares are owned by company insiders. Comparatively, 0.3% of Pinnacle West Capital shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Valuation and Earnings
This table compares The Southern and Pinnacle West Capital's top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| The Southern | $21.42 billion | 3.10 | $4.75 billion | $3.11 | 20.22 |
| Pinnacle West Capital | $3.47 billion | 2.68 | $538.32 million | $4.77 | 17.31 |
The Southern has higher revenue and earnings than Pinnacle West Capital. Pinnacle West Capital is trading at a lower price-to-earnings ratio than The Southern, indicating that it is currently the more affordable of the two stocks.
Volatility and Risk
The Southern has a beta of 0.39, suggesting that its stock price is 61% less volatile than the S&P 500. Comparatively, Pinnacle West Capital has a beta of 0.25, suggesting that its stock price is 75% less volatile than the S&P 500.
Summary
The Southern beats Pinnacle West Capital on 10 of the 17 factors compared between the two stocks.
