Analyzing NRG Energy (NYSE:NRG) and Consolidated Edison (NYSE:ED)

Consolidated Edison (NYSE:ED) and NRG Energy (NYSE:NRG) are both large-cap utilities companies, but which is the better investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, valuation, risk, profitability, earnings and analyst recommendations.

Analyst Recommendations

This is a breakdown of current ratings for Consolidated Edison and NRG Energy, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Consolidated Edison	5	5	3	0	1.85
NRG Energy	1	2	11	2	2.88

Consolidated Edison currently has a consensus target price of $102.54, indicating a potential upside of 4.39%. NRG Energy has a consensus target price of $199.21, indicating a potential upside of 27.60%. Given NRG Energy’s stronger consensus rating and higher probable upside, analysts plainly believe NRG Energy is more favorable than Consolidated Edison.

Volatility & Risk

Consolidated Edison has a beta of 0.37, suggesting that its share price is 63% less volatile than the S&P 500. Comparatively, NRG Energy has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500.

Earnings & Valuation

This table compares Consolidated Edison and NRG Energy”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Consolidated Edison	$15.26 billion	2.32	$1.82 billion	$5.72	17.17
NRG Energy	$28.13 billion	1.06	$1.13 billion	$6.69	23.34

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

Profitability

This table compares Consolidated Edison and NRG Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Consolidated Edison	12.27%	8.79%	2.89%
NRG Energy	4.84%	103.57%	7.38%

Institutional and Insider Ownership

66.3% of Consolidated Edison shares are held by institutional investors. Comparatively, 97.7% of NRG Energy shares are held by institutional investors. 0.2% of Consolidated Edison shares are held by insiders. Comparatively, 0.9% of NRG Energy shares are held by 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

Consolidated Edison pays an annual dividend of $3.40 per share and has a dividend yield of 3.5%. NRG Energy pays an annual dividend of $1.76 per share and has a dividend yield of 1.1%. Consolidated Edison pays out 59.4% of its earnings in the form of a dividend. NRG Energy pays out 26.3% 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. Consolidated Edison has increased its dividend for 52 consecutive years and NRG Energy has increased its dividend for 1 consecutive years. Consolidated Edison is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

NRG Energy beats Consolidated Edison on 13 of the 18 factors compared between the two stocks.

About Consolidated Edison

Consolidated Edison, Inc., through its subsidiaries, engages in the regulated electric, gas, and steam delivery businesses in the United States. It offers electric services to approximately 3.7 million customers in New York City and Westchester County; gas to approximately 1.1 million customers in Manhattan, the Bronx, parts of Queens, and Westchester County; and steam to approximately 1,530 customers in parts of Manhattan. The company also supplies electricity to approximately 0.3 million customers in southeastern New York and northern New Jersey; and gas to approximately 0.2 million customers in southeastern New York. In addition, it operates 545 circuit miles of transmission lines; 15 transmission substations; 63 distribution substations; 90,051 in-service line transformers; 3,788 pole miles of overhead distribution lines; and 2,314 miles of underground distribution lines, as well as 4,363 miles of mains and 380,870 service lines for natural gas distribution. Further, the company invests in electric and gas transmission projects. It primarily sells electricity to industrial, commercial, residential, and government customers. Consolidated Edison, Inc. was founded in 1823 and is based in New York, New York.

About NRG Energy

NRG Energy, Inc., together with its subsidiaries, operates as an energy and home services company in the United States and Canada. It operates through Texas; East; West/Services/Other; Vivint Smart Home; and Corporate Activities segments. The company produces and sells electricity generated using coal, oil, solar, and battery storage; natural gas; and a cloud-based home platform, including hardware, software, sales, installation, customer service, technical support, and professional monitoring solutions. It offers retail electricity and energy management, line and surge protection products, HVAC installation, repair and maintenance, home protection products, carbon offsets, back-up power stations, portable power, portable solar, and portable lighting; retail services comprising demand response, commodity sales, energy efficiency, and energy management solutions; and system power, distributed generation, renewable and low-carbon products, carbon management and specialty services, backup generation, storage and distributed solar, and energy advisory services. In addition, the company trades in power, natural gas, and related commodities; environmental products; weather products; and financial products, including forwards, futures, options, and swaps. It offers its products and services under the NRG, Reliant, Direct Energy, Green Mountain Energy, and Vivint. It serves residential, commercial, government, industrial, and wholesale customers. NRG Energy, Inc. was founded in 1989 and is headquartered in Houston, Texas.