Head to Head Review: Eversource Energy (ES) and Pinnacle West Capital Corporation (PNW)

Eversource Energy (NYSE: ES) and Pinnacle West Capital Corporation (NYSE:PNW) are both large-cap utilities companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, valuation and profitability.

Insider & Institutional Ownership

71.3% of Eversource Energy shares are owned by institutional investors. Comparatively, 85.9% of Pinnacle West Capital Corporation shares are owned by institutional investors. 0.5% of Eversource Energy shares are owned by insiders. Comparatively, 0.7% of Pinnacle West Capital Corporation shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Eversource Energy pays an annual dividend of $1.90 per share and has a dividend yield of 3.0%. Pinnacle West Capital Corporation pays an annual dividend of $2.62 per share and has a dividend yield of 2.9%. Eversource Energy pays out 61.5% of its earnings in the form of a dividend. Pinnacle West Capital Corporation pays out 58.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Eversource Energy has raised its dividend for 5 consecutive years. Eversource Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Eversource Energy has a beta of 0.28, suggesting that its stock price is 72% less volatile than the S&P 500. Comparatively, Pinnacle West Capital Corporation has a beta of 0.37, suggesting that its stock price is 63% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Eversource Energy and Pinnacle West Capital Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Eversource Energy 0 6 3 0 2.33
Pinnacle West Capital Corporation 1 7 0 0 1.88

Eversource Energy currently has a consensus price target of $62.69, indicating a potential upside of 0.36%. Pinnacle West Capital Corporation has a consensus price target of $81.71, indicating a potential downside of 8.06%. Given Eversource Energy’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Eversource Energy is more favorable than Pinnacle West Capital Corporation.

Profitability

This table compares Eversource Energy and Pinnacle West Capital Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Eversource Energy 12.81% 9.15% 3.07%
Pinnacle West Capital Corporation 14.37% 10.20% 3.14%

Earnings and Valuation

This table compares Eversource Energy and Pinnacle West Capital Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Eversource Energy $7.68 billion 2.58 $2.63 billion $3.09 20.21
Pinnacle West Capital Corporation $3.53 billion 2.81 $1.53 billion $4.52 19.66

Eversource Energy has higher revenue and earnings than Pinnacle West Capital Corporation. Pinnacle West Capital Corporation is trading at a lower price-to-earnings ratio than Eversource Energy, indicating that it is currently the more affordable of the two stocks.

Summary

Pinnacle West Capital Corporation beats Eversource Energy on 9 of the 17 factors compared between the two stocks.

About Eversource Energy

Eversource Energy is a utility holding company engaged in the energy delivery business. The Company operates through three segments: electric distribution, electric transmission and natural gas distribution. The Company’s electric distribution segment consists of the distribution businesses, which are engaged in the distribution of electricity to retail customers in Connecticut, eastern Massachusetts, New Hampshire and western Massachusetts, and the regulated electric generation businesses. Its electric transmission segment owns and maintains transmission facilities that are part of an interstate power transmission grid over which electricity is transmitted throughout New England. Its electric distribution segment consists of the distribution businesses of The Connecticut Light and Power Company (CL&P), NSTAR Electric Company (NSTAR Electric), Public Service Company of New Hampshire (PSNH) and Western Massachusetts Electric Company (WMECO).

About Pinnacle West Capital Corporation

Pinnacle West Capital Corporation is a holding company that operates through its subsidiaries. The Company operates through regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses and related activities, and includes electricity generation, transmission and distribution. It owned and leased 6,236 megawatt (MW) of regulated generation capacity and the Company held a mix of both long-term and short-term purchased power agreements for additional capacity, including agreements for the purchase of renewable energy, as of December 31, 2016. Its subsidiaries include Arizona Public Service Company, which is a vertically-integrated electric utility that provides retail or wholesale electric service to the State of Arizona, with the exceptions of about one-half of the Phoenix metropolitan area, the Tucson metropolitan area and Mohave County in northwestern Arizona.

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