Reviewing Teekay Tankers (TNK) & Plains GP (PAGP)

Teekay Tankers (NYSE: TNK) and Plains GP (NYSE:PAGP) are both transportation companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, dividends, risk, earnings, analyst recommendations, valuation and institutional ownership.

Earnings and Valuation

This table compares Teekay Tankers and Plains GP’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Teekay Tankers $300.30 million 0.69 $62.85 million ($0.28) -4.11
Plains GP $26.22 million 129.21 -$731.00 million ($4.63) -4.73

Teekay Tankers has higher revenue and earnings than Plains GP. Plains GP is trading at a lower price-to-earnings ratio than Teekay Tankers, indicating that it is currently the more affordable of the two stocks.

Dividends

Teekay Tankers pays an annual dividend of $0.12 per share and has a dividend yield of 10.4%. Plains GP pays an annual dividend of $1.20 per share and has a dividend yield of 5.5%. Teekay Tankers pays out -42.9% of its earnings in the form of a dividend. Plains GP pays out -25.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Teekay Tankers has raised its dividend for 3 consecutive years. Teekay Tankers is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Teekay Tankers has a beta of 2.19, meaning that its stock price is 119% more volatile than the S&P 500. Comparatively, Plains GP has a beta of 1.39, meaning that its stock price is 39% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations for Teekay Tankers and Plains GP, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Teekay Tankers 1 2 1 0 2.00
Plains GP 0 10 7 0 2.41

Teekay Tankers currently has a consensus price target of $1.87, suggesting a potential upside of 62.32%. Plains GP has a consensus price target of $26.06, suggesting a potential upside of 19.12%. Given Teekay Tankers’ higher possible upside, equities research analysts clearly believe Teekay Tankers is more favorable than Plains GP.

Institutional & Insider Ownership

28.6% of Teekay Tankers shares are owned by institutional investors. Comparatively, 85.7% of Plains GP shares are owned by institutional investors. 39.9% of Plains GP shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Teekay Tankers and Plains GP’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Teekay Tankers -11.43% -0.99% -0.49%
Plains GP -2.79% 0.73% 0.33%

Summary

Teekay Tankers beats Plains GP on 9 of the 17 factors compared between the two stocks.

About Teekay Tankers

Teekay Tankers Ltd. is an international provider of marine transportation to the oil industries. The Company’s business is to own crude oil and product tankers. The Company has two segments: conventional tanker and ship-to-ship transfer. Its conventional tanker segment consists of the operation of all of its tankers, including those employed on full service lightering contracts. Its ship-to-ship transfer segment consists of its lightering support services, including those provided to the Company’s conventional tanker segment as part of full service lightering operations and other related services. Its operations are managed by Teekay Tankers Management Services Ltd., which provides the Company with commercial, technical, administrative and strategic services. Its fleet consists of approximately 60 conventional vessels (including over 10 in-chartered vessels and an approximately 50%-owned very large crude carrier (VLCC)) and approximately six ship-to-ship (STS) support vessels.

About Plains GP

Plains GP Holdings, L.P. owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids (NGL), natural gas and refined products. The Company operates through three segments: Transportation, Facilities, and Supply and Logistics. Through its three business segments, the Company is engaged in the transportation, storage, terminaling and marketing of crude oil, NGL and natural gas. The Transportation segment operations consist of fee-based activities associated with transporting crude oil and NGL on pipelines, gathering systems, trucks and barges. The Facilities segment operations consist of fee-based activities associated with providing storage, terminaling and throughput services for crude oil, refined products, NGL and natural gas, as well as NGL fractionation and isomerization services and natural gas and condensate processing services. The Supply and Logistics segment operations consist of the merchant-related activities.

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