Southern Company (The) (NYSE: SO) and NRG Energy (NYSE:NRG) are both mid-cap utilities companies, but which is the better business? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, institutional ownership, earnings, profitability and dividends.

Analyst Recommendations

This is a summary of current recommendations and price targets for Southern Company (The) and NRG Energy, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Southern Company (The) 3 5 8 0 2.31
NRG Energy 0 1 7 0 2.88

Southern Company (The) presently has a consensus target price of $49.27, indicating a potential downside of 5.61%. NRG Energy has a consensus target price of $25.00, indicating a potential upside of 0.00%. Given NRG Energy’s stronger consensus rating and higher probable upside, analysts plainly believe NRG Energy is more favorable than Southern Company (The).

Volatility and Risk

Southern Company (The) has a beta of 0.13, suggesting that its stock price is 87% less volatile than the S&P 500. Comparatively, NRG Energy has a beta of 1.24, suggesting that its stock price is 24% more volatile than the S&P 500.

Dividends

Southern Company (The) pays an annual dividend of $2.32 per share and has a dividend yield of 4.4%. NRG Energy pays an annual dividend of $0.12 per share and has a dividend yield of 0.5%. Southern Company (The) pays out 346.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NRG Energy pays out -2.8% of its earnings in the form of a dividend. Southern Company (The) has raised its dividend for 15 consecutive years. Southern Company (The) is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

53.1% of Southern Company (The) shares are held by institutional investors. Comparatively, 91.9% of NRG Energy shares are held by institutional investors. 0.7% of Southern Company (The) shares are held by company insiders. Comparatively, 0.3% of NRG Energy shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Southern Company (The) and NRG Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Southern Company (The) 2.93% 11.30% 2.64%
NRG Energy -10.67% 12.38% 1.85%

Valuation & Earnings

This table compares Southern Company (The) and NRG Energy’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Southern Company (The) $22.65 billion 2.30 $5.63 billion $0.67 77.91
NRG Energy $12.53 billion 0.63 $2.50 billion ($4.36) -5.73

Southern Company (The) has higher revenue and earnings than NRG Energy. NRG Energy is trading at a lower price-to-earnings ratio than Southern Company (The), indicating that it is currently the more affordable of the two stocks.

Summary

Southern Company (The) beats NRG Energy on 11 of the 17 factors compared between the two stocks.

Southern Company (The) Company Profile

The Southern Company (Southern Company) is a holding company. The Company owns all of the stock of the traditional electric operating companies and the parent entities of Southern Power Company (Southern Power) and Southern Company Gas, and owns other direct and indirect subsidiaries. The Company’s segments include Gas distribution operations, Gas marketing services, Wholesale gas services, Gas midstream operations and All other. The Gas distribution operations segment includes natural gas local distribution utilities that construct, manage, and maintain intrastate natural gas pipelines and gas distribution facilities in seven states. The Gas marketing services segment provides natural gas commodity and related services to customers markets that provide for customer choice. The Wholesale gas services segment engages in natural gas storage and gas pipeline arbitrage. The Gas midstream operations consist primarily of gas pipeline investments, with storage and fuels.

NRG Energy Company Profile

NRG Energy, Inc. (NRG) is an integrated power company. The Company is engaged in producing, selling and delivering electricity and related products and services in various markets in the United States. The Company’s segments include Generation, Retail, Renewables, NRG Yield, Inc. (NRG Yield) and Corporate activities. The Generation segment includes generation, international and Boston Energy Trading and Marketing LLC (BETM). The Retail segment includes Mass customers and Business Solutions. Its Business Solutions include commercial, industrial and governmental/institutional (C&I) customers, and other distributed and reliability products. The Renewables segment includes solar and wind assets. The NRG Yield segment includes certain of the Company’s contracted generation assets. The corporate activities segment includes residential solar and electric vehicle services. The Company owned and operated approximately 47,000 megawatts (MW) of generation, as of December 31, 2016.

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