Comparing FirstEnergy (NYSE:FE) and Pinnacle West Capital (NYSE:PNW)

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

Insider and Institutional Ownership

91.5% of Pinnacle West Capital shares are owned by institutional investors. Comparatively, 89.4% of FirstEnergy shares are owned by institutional investors. 0.2% of Pinnacle West Capital shares are owned by insiders. Comparatively, 0.1% of FirstEnergy shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Pinnacle West Capital	11.52%	8.99%	2.08%
FirstEnergy	7.40%	11.07%	2.73%

Valuation & Earnings

This table compares Pinnacle West Capital and FirstEnergy”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pinnacle West Capital	$5.34 billion	2.41	$616.53 million	$5.22	20.37
FirstEnergy	$15.09 billion	1.80	$1.02 billion	$2.08	22.57

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

Risk & Volatility

Pinnacle West Capital has a beta of 0.48, meaning that its share price is 52% less volatile than the S&P 500. Comparatively, FirstEnergy has a beta of 0.39, meaning that its share price is 61% less volatile than the S&P 500.

Dividends

Pinnacle West Capital pays an annual dividend of $3.64 per share and has a dividend yield of 3.4%. FirstEnergy pays an annual dividend of $1.86 per share and has a dividend yield of 4.0%. Pinnacle West Capital pays out 69.7% of its earnings in the form of a dividend. FirstEnergy pays out 89.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. FirstEnergy has raised its dividend for 3 consecutive years. FirstEnergy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pinnacle West Capital	0	11	5	0	2.31
FirstEnergy	0	4	8	0	2.67

Pinnacle West Capital currently has a consensus price target of $103.39, indicating a potential downside of 2.77%. FirstEnergy has a consensus price target of $50.77, indicating a potential upside of 8.13%. Given FirstEnergy’s stronger consensus rating and higher possible upside, analysts plainly believe FirstEnergy is more favorable than Pinnacle West Capital.

Summary

FirstEnergy beats Pinnacle West Capital on 10 of the 17 factors compared between the two stocks.

About Pinnacle West Capital

Pinnacle West Capital Corporation, through its subsidiary, provides retail and wholesale electric services primarily in the state of Arizona. The company engages in the generation, transmission, and distribution of electricity using coal, nuclear, gas, oil, and solar generating facilities. Its transmission facilities include overhead lines and underground lines; and distribution facilities consist of overhead lines and underground primary cables. The company also owns and maintains transmission and distribution substations; and owns energy storage facilities. Pinnacle West Capital Corporation was incorporated in 1985 and is headquartered in Phoenix, Arizona.

About FirstEnergy

FirstEnergy Corp., through its subsidiaries, generates, transmits, and distributes electricity in the United States. It operates through Regulated Distribution and Regulated Transmission segments. The company owns and operates coal-fired, nuclear, hydroelectric, wind, and solar power generating facilities. It operates 24,080 circuit miles of overhead and underground transmission lines; and electric distribution systems, including 274,518 miles of overhead pole line and underground conduit carrying primary, secondary, and street lighting circuits. The company serves approximately 6 million customers in Ohio, Pennsylvania, West Virginia, Maryland, New Jersey, and New York. FirstEnergy Corp. was incorporated in 1996 and is headquartered in Akron, Ohio.