Critical Contrast: FirstEnergy Corporation (FE) & The AES Corporation (AES)
FirstEnergy Corporation (NYSE: FE) and The AES Corporation (NYSE:AES) are both mid-cap utilities companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, dividends, institutional ownership, analyst recommendations, earnings and profitability.
FirstEnergy Corporation pays an annual dividend of $1.44 per share and has a dividend yield of 4.4%. The AES Corporation pays an annual dividend of $0.48 per share and has a dividend yield of 4.3%. FirstEnergy Corporation pays out -12.3% of its earnings in the form of a dividend. The AES Corporation pays out -42.1% 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. The AES Corporation has increased its dividend for 4 consecutive years.
Earnings and Valuation
This table compares FirstEnergy Corporation and The AES Corporation’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|FirstEnergy Corporation||$13.76 billion||1.05||$3.96 billion||($11.70)||-2.78|
|The AES Corporation||$14.05 billion||0.52||$3.58 billion||($1.14)||-9.68|
FirstEnergy Corporation has higher revenue, but lower earnings than The AES Corporation. The AES Corporation is trading at a lower price-to-earnings ratio than FirstEnergy Corporation, indicating that it is currently the more affordable of the two stocks.
This is a breakdown of recent ratings and target prices for FirstEnergy Corporation and The AES Corporation, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|The AES Corporation||1||4||0||0||1.80|
FirstEnergy Corporation presently has a consensus target price of $33.75, indicating a potential upside of 3.59%. The AES Corporation has a consensus target price of $12.00, indicating a potential upside of 8.70%. Given The AES Corporation’s higher probable upside, analysts clearly believe The AES Corporation is more favorable than FirstEnergy Corporation.
Risk and Volatility
FirstEnergy Corporation has a beta of 0.18, indicating that its stock price is 82% less volatile than the S&P 500. Comparatively, The AES Corporation has a beta of 1.21, indicating that its stock price is 21% more volatile than the S&P 500.
Insider and Institutional Ownership
79.9% of FirstEnergy Corporation shares are owned by institutional investors. Comparatively, 93.2% of The AES Corporation shares are owned by institutional investors. 0.3% of FirstEnergy Corporation shares are owned by insiders. Comparatively, 1.1% of The AES Corporation shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
This table compares FirstEnergy Corporation and The AES Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|The AES Corporation||-5.30%||15.86%||2.57%|
The AES Corporation beats FirstEnergy Corporation on 11 of the 17 factors compared between the two stocks.
About FirstEnergy Corporation
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 The AES Corporation
The AES Corporation is a holding company. The Company, through its subsidiaries and affiliates, operates a diversified portfolio of electricity generation and distribution businesses. It is organized into six strategic business units (SBUs): the United States; Andes; Brazil; Mexico, Central America and the Caribbean (MCAC); Europe, and Asia. As of December 31, 2016, its United States SBU had 18 generation facilities and two integrated utilities in the United States. As of December 31, 2016, its Andes SBU had generation facilities in three countries. Its Brazil SBU has generation and distribution businesses, Eletropaulo and Tiete. As of December 31, 2016, its MCAC SBU had a portfolio of distribution businesses and generation facilities, including renewable energy, in five countries. As of December 31, 2016, its Europe SBU had generation facilities in five countries. As of December 31, 2016, its Asia SBU had generation facilities in three countries.
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