Critical Review: FirstEnergy (FE) vs. TECO Energy (TE)

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

Earnings & Valuation

This table compares FirstEnergy and TECO Energy’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
FirstEnergy $14.56 billion 0.98 -$6.18 billion ($11.70) -2.74
TECO Energy N/A N/A N/A $1.06 26.08

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for FirstEnergy and TECO Energy, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
FirstEnergy 0 7 7 0 2.50
TECO Energy 0 0 0 0 N/A

FirstEnergy currently has a consensus target price of $35.54, suggesting a potential upside of 10.69%. Given FirstEnergy’s higher possible upside, equities analysts clearly believe FirstEnergy is more favorable than TECO Energy.

Insider & Institutional Ownership

82.5% of FirstEnergy shares are owned by institutional investors. 0.3% of FirstEnergy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
FirstEnergy -35.99% 19.29% 2.79%
TECO Energy 0.84% 0.85% 0.24%

Dividends

FirstEnergy pays an annual dividend of $1.44 per share and has a dividend yield of 4.5%. TECO Energy pays an annual dividend of $0.92 per share and has a dividend yield of 3.3%. FirstEnergy pays out -12.3% of its earnings in the form of a dividend. TECO Energy pays out 86.8% 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.

Summary

FirstEnergy beats TECO Energy on 10 of the 13 factors compared between the two stocks.

About FirstEnergy

FirstEnergy Corp. is a holding company. The Company is engaged in holding, directly or indirectly, all of the outstanding equity of its principal subsidiaries. Its segments include Regulated Distribution, Regulated Transmission, Competitive Energy Services (CES) and Corporate/Other. As of December 31, 2016, the Regulated Distribution segment distributed electricity through the Company’s 10 utility operating companies, serving approximately six million customers, and purchased power for its provider of last resort (POLR), standard offer service (SOS), standard offer service (SSO) and default service requirements in Ohio, Pennsylvania, New Jersey and Maryland. The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAIL). The CES segment primarily supplies electricity to end use customers through retail and wholesale arrangements.

About TECO Energy

TECO Energy, Inc. (TECO Energy) is a holding company for regulated utilities and other businesses. TECO Energy holds all of the common stock of Tampa Electric Company (TEC) and through its subsidiary, New Mexico Gas Intermediate, Inc. (NMGI), owns New Mexico Gas Company, Inc. (NMGC). The Company’s segments include Tampa Electric, Peoples Gas System (PGS) and NMGC. Its Tampa Electric division is engaged in the generation, purchase, transmission, distribution and sale of electric energy. The retail territory served comprises an area of approximately 2,000 square miles in West Central Florida. PGS, the gas division of TEC, is engaged in the purchase, distribution and sale of natural gas for residential, commercial, industrial and electric power generation customers in the state of Florida. NMGC is engaged in the purchase, distribution and sale of natural gas for residential, commercial and industrial customers in the state of New Mexico.

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