Critical Analysis: FirstEnergy (NYSE:FE) versus PPL (NYSE:PPL)

PPL (NYSE:PPL) and FirstEnergy (NYSE:FE) are both large-cap utilities companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, valuation, risk, earnings and profitability.

Valuation and Earnings

This table compares PPL and FirstEnergy’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PPL $7.79 billion 3.18 $1.83 billion $2.40 14.25
FirstEnergy $11.26 billion 2.28 $1.35 billion $2.59 18.35

PPL has higher earnings, but lower revenue than FirstEnergy. PPL is trading at a lower price-to-earnings ratio than FirstEnergy, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings and recommmendations for PPL and FirstEnergy, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PPL 0 9 2 0 2.18
FirstEnergy 0 3 4 0 2.57

PPL presently has a consensus target price of $36.65, indicating a potential upside of 7.20%. FirstEnergy has a consensus target price of $50.29, indicating a potential upside of 5.82%. Given PPL’s higher possible upside, equities research analysts clearly believe PPL is more favorable than FirstEnergy.

Dividends

PPL pays an annual dividend of $1.65 per share and has a dividend yield of 4.8%. FirstEnergy pays an annual dividend of $1.52 per share and has a dividend yield of 3.2%. PPL pays out 68.8% of its earnings in the form of a dividend. FirstEnergy pays out 58.7% 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.

Profitability

This table compares PPL and FirstEnergy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PPL 23.17% 14.73% 3.98%
FirstEnergy 10.49% 19.21% 3.32%

Volatility and Risk

PPL has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500. Comparatively, FirstEnergy has a beta of 0.18, meaning that its share price is 82% less volatile than the S&P 500.

Institutional and Insider Ownership

70.7% of PPL shares are owned by institutional investors. Comparatively, 88.3% of FirstEnergy shares are owned by institutional investors. 0.3% of PPL shares are owned by company insiders. Comparatively, 0.3% of FirstEnergy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

About PPL

PPL Corporation, a utility holding company, delivers electricity and natural gas in the United States and the United Kingdom. The company operates through three segments: U.K. Regulated, Kentucky Regulated, and Pennsylvania Regulated. It serves approximately 414,000 electric and 328,000 natural gas customers in Louisville and adjacent areas in Kentucky; 527,000 electric customers in central, southeastern, and western Kentucky; and 28,000 electric customers in 5 counties in southwestern Virginia. The company also provides electric delivery services to approximately 1.4 million customers in Pennsylvania; operates electricity distribution networks in the United Kingdom; generates electricity from coal, gas, hydro, and solar sources in Kentucky; and sells wholesale electricity to 10 municipalities in Kentucky. PPL Corporation was founded in 1920 and is headquartered in Allentown, Pennsylvania.

About FirstEnergy

FirstEnergy Corp., through its subsidiaries, generates, transmits, and distributes electricity in the United States. The company operates through Regulated Distribution and Regulated Transmission segments. It owns and operates coal-fired, nuclear, hydroelectric, natural gas, wind, and solar power generating facilities. The company also provides energy-related products and services to retail and wholesale customers. It operates 24,506 circuit miles of overhead and underground transmission lines; and electric distribution systems, including 277,284 miles of overhead pole line and underground conduit carrying primary, secondary, and street lighting circuits, as well as owns substations with a total installed transformer capacity of approximately 164,611,989 kilovolt-amperes. The company serves approximately six million customers in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey, and New York. FirstEnergy Corp. was founded in 1996 and is headquartered in Akron, Ohio.

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