Financial Survey: WEC Energy Group (WEC) versus Southern (SO)

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

Insider and Institutional Ownership

73.0% of WEC Energy Group shares are held by institutional investors. Comparatively, 53.7% of Southern shares are held by institutional investors. 1.0% of WEC Energy Group shares are held by insiders. Comparatively, 0.7% of Southern shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Risk and Volatility

WEC Energy Group has a beta of 0.05, indicating that its share price is 95% less volatile than the S&P 500. Comparatively, Southern has a beta of 0.03, indicating that its share price is 97% less volatile than the S&P 500.

Dividends

WEC Energy Group pays an annual dividend of $2.08 per share and has a dividend yield of 3.4%. Southern pays an annual dividend of $2.32 per share and has a dividend yield of 5.2%. WEC Energy Group pays out 54.9% of its earnings in the form of a dividend. Southern pays out 414.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WEC Energy Group has raised its dividend for 7 consecutive years and Southern has raised its dividend for 16 consecutive years. Southern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of current ratings and target prices for WEC Energy Group and Southern, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
WEC Energy Group 1 7 1 0 2.00
Southern 5 6 6 0 2.06

WEC Energy Group presently has a consensus target price of $67.25, suggesting a potential upside of 9.92%. Southern has a consensus target price of $50.27, suggesting a potential upside of 12.64%. Given Southern’s stronger consensus rating and higher probable upside, analysts plainly believe Southern is more favorable than WEC Energy Group.

Valuation & Earnings

This table compares WEC Energy Group and Southern’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
WEC Energy Group $7.65 billion 2.52 $1.20 billion $3.79 16.14
Southern $19.90 billion 2.25 $2.49 billion $0.56 79.75

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

Profitability

This table compares WEC Energy Group and Southern’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
WEC Energy Group 15.75% 10.81% 3.24%
Southern 2.59% 10.81% 2.50%

WEC Energy Group Company Profile

WEC Energy Group, Inc. was a diversified holding company with natural gas and electric utility operations, an approximately 60% equity ownership interest in American Transmission Company LLC, and non-utility electric operations through its We Power business, as of December 31, 2016. Its segments include Wisconsin; Illinois; Other States; Electric Transmission; We Power, and Corporate and Other. Wisconsin includes the electric and natural gas utility operations of Wisconsin Electric Power Company, Wisconsin Gas LLC, and Wisconsin Public Service Corporation, including WE’s and WPS’s electric and natural gas operations in the state of Michigan. Illinois includes the natural gas utility and non-utility operations of The Peoples Gas Light and Coke Company and North Shore Gas Company. Other states includes the natural gas utility and non-utility operations of Minnesota Energy Resources Corporation and Michigan Gas Utilities Corporation.

Southern 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.

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