Critical Comparison: Hess (HES) and Sprague Resources (SRLP)

Hess (NYSE: HES) and Sprague Resources (NYSE:SRLP) are both energy companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, profitability, earnings, dividends and risk.

Institutional & Insider Ownership

89.9% of Hess shares are held by institutional investors. Comparatively, 22.0% of Sprague Resources shares are held by institutional investors. 11.8% of Hess shares are held by company 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.

Dividends

Hess pays an annual dividend of $1.00 per share and has a dividend yield of 2.3%. Sprague Resources pays an annual dividend of $2.55 per share and has a dividend yield of 10.3%. Hess pays out -7.6% of its earnings in the form of a dividend. Sprague Resources pays out 142.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hess has increased its dividend for 3 consecutive years.

Risk & Volatility

Hess has a beta of 1.58, meaning that its share price is 58% more volatile than the S&P 500. Comparatively, Sprague Resources has a beta of 1.36, meaning that its share price is 36% more volatile than the S&P 500.

Profitability

This table compares Hess and Sprague Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hess -74.55% -9.82% -5.31%
Sprague Resources 1.50% 24.89% 4.21%

Analyst Recommendations

This is a summary of current ratings and price targets for Hess and Sprague Resources, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hess 3 8 7 0 2.22
Sprague Resources 0 0 3 0 3.00

Hess currently has a consensus price target of $52.24, indicating a potential upside of 21.49%. Sprague Resources has a consensus price target of $31.67, indicating a potential upside of 27.69%. Given Sprague Resources’ stronger consensus rating and higher probable upside, analysts plainly believe Sprague Resources is more favorable than Hess.

Earnings and Valuation

This table compares Hess and Sprague Resources’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Hess $5.41 billion 2.53 -$6.13 billion ($13.13) -3.27
Sprague Resources $2.39 billion 0.23 $10.16 million $1.79 13.85

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

Summary

Sprague Resources beats Hess on 9 of the 17 factors compared between the two stocks.

About Hess

Hess Corporation is an exploration and production company. The Company is engaged in exploration, development, production, transportation, purchase and sale of crude oil, natural gas liquids (NGL) and natural gas. The Company’s segments include Exploration and Production, and Bakken Midstream. Its Exploration and Production segment explores for, develops, produces, purchases and sells crude oil, NGLs and natural gas with production operations primarily in the United States, Denmark, the Malaysia/Thailand Joint Development Area (JDA), Malaysia and Norway. The Bakken Midstream segment provides fee-based services, including crude oil and natural gas gathering, processing of natural gas and the fractionation of NGLs, transportation of crude oil by rail car, terminaling and loading crude oil and NGLs, and the storage and terminaling of propane, primarily in the Bakken shale play of North Dakota.

About Sprague Resources

Sprague Resources LP is engaged in the purchase, storage, distribution and sale of refined products and natural gas, and provides storage and handling services for a range of materials. The Company operates through four segments: refined products, which purchases a range of refined products, such as heating oil, diesel fuel, residual fuel oil, asphalt, kerosene, jet fuel and gasoline from refining companies, trading organizations and producers; natural gas, which purchases natural gas from natural gas producers and trading companies, and sells and distributes natural gas to commercial and industrial customers in the Northeast and Mid-Atlantic United States; materials handling, which offloads, stores and prepares for delivery a range of customer-owned products, including asphalt, clay slurry, coal and heavy equipment, and other operations, which include the purchase and distribution of coal, certain commercial trucking activities and the heating equipment service business.

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