Critical Review: Southern Company (The) (SO) versus Xcel Energy (XEL)
Southern Company (The) (NYSE: SO) and Xcel Energy (NYSE:XEL) are both large-cap utilities companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, risk, profitability, earnings, institutional ownership, valuation and dividends.
Risk and Volatility
Southern Company (The) has a beta of 0.13, meaning that its share price is 87% less volatile than the S&P 500. Comparatively, Xcel Energy has a beta of 0.19, meaning that its share price is 81% less volatile than the S&P 500.
This table compares Southern Company (The) and Xcel 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%|
Southern Company (The) pays an annual dividend of $2.32 per share and has a dividend yield of 4.7%. Xcel Energy pays an annual dividend of $1.44 per share and has a dividend yield of 3.0%. 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. Xcel Energy pays out 63.4% of its earnings in the form of a dividend. Southern Company (The) has raised its dividend for 13 consecutive years and Xcel Energy has raised its dividend for 15 consecutive years.
Insider & Institutional Ownership
53.3% of Southern Company (The) shares are owned by institutional investors. Comparatively, 72.5% of Xcel Energy shares are owned by institutional investors. 1.0% of Southern Company (The) shares are owned by company insiders. Comparatively, 0.2% of Xcel Energy shares are owned by company 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.
This is a breakdown of recent ratings and target prices for Southern Company (The) and Xcel Energy, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Southern Company (The)||2||4||8||0||2.43|
Southern Company (The) currently has a consensus price target of $48.90, suggesting a potential downside of 0.94%. Xcel Energy has a consensus price target of $47.75, suggesting a potential upside of 0.36%. Given Xcel Energy’s higher probable upside, analysts plainly believe Xcel Energy is more favorable than Southern Company (The).
Valuation and Earnings
This table compares Southern Company (The) and Xcel Energy’s gross 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||2.18||$5.63 billion||$0.67||73.67|
|Xcel Energy||$11.43 billion||2.11||$3.76 billion||$2.27||20.96|
Southern Company (The) has higher revenue and earnings than Xcel Energy. Xcel 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.
Southern Company (The) beats Xcel Energy on 9 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.
Xcel Energy Company Profile
Xcel Energy Inc. is a public utility holding company. The Company’s operations include the activity of four utility subsidiaries that serve electric and natural gas customers in eight states. The Company’s segments include regulated electric utility, regulated natural gas utility and all other. The Company’s utility subsidiaries include NSP-Minnesota, NSP-Wisconsin, Public Service Company of Colorado (PSCo) and Southwestern Public Service Co. (SPS), which serve customers in portions of Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin. Along with WYCO Development LLC (WYCO), a joint venture formed with Colorado Interstate Gas Company, LLC (CIG) to develop and lease natural gas pipelines storage and compression facilities, and WestGas InterState, Inc. (WGI), an interstate natural gas pipeline company, these companies comprise the regulated utility operations.
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