The novel coronavirus pandemic is spreading at an alarming rate, with number of deaths increasing each day. In the United States, the situation is more critical. As a whole, the global economy is declining rapidly. Investors are getting increasingly apprehensive about a market meltdown.
Despite the scenario, companies in the Zacks Utilities sector have been providing 24X7 basic services like electricity, water and natural gas to millions of customers. Thus, these stocks are less affected by economic disruption and are considered safe investment options. Though returns from the overall sector are declining, electric utilities are staying afloat on the back of demand from residential space, hospitals, medical establishments and pharmaceutical manufacturers among others that are helping in the fight against the virus.
Moreover, the Fed’s decision to lower the interest level will benefit the capital-intensive utility operators as they will be able to procure funds at lower rates. Amid this COVID-19 led crisis, investors can take a look at these stocks.
In this article, we run a comparative analysis on two Utility - Electric Power companies — Entergy Corporation ETR and Edison International EIX — to ascertain which is a better option to hold.
Both the stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Entergy has a market capitalization of $16.74 billion, while the same for Edison International is $17.90 billion.
The Zacks Consensus Estimate for Entergy’s 2020 earnings is pegged at $5.55 on revenues of $11.32 billion. This implies 2.78% and 4.09% increase of the bottom and the top line, respectively, from the year-ago reported figures.
The Zacks Consensus Estimate for Edison International’s 2020 earnings is pegged at $4.47 on revenues of $12.79 billion. This implies 4.89% decline of the bottom line and 3.62% increase of the top line, respectively, from the year-ago reported figures.
Price Performance & Long-Term Growth
Amid the current scenario, shares of most of the industry players are declining. In the past 12 months, Entergy’s shares have lost 11.7% compared with the industry's decline of 13.1%. Shares of Edison International have lost 22.6%.
Entergy’s long-term (3 to 5 years) earnings growth is pegged at 6.33%, while Edison International’s long-term earnings growth is at 3.23%
Entergy has an impressive VGM Score of B, while Edison International has VGM Score of C. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. Back tested results show that stocks with a favorable VGM Score of A or B coupled with a bullish Zacks Rank are the best investment options.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12 months for Entergy and Edison International is 11.02% and 11.73%, respectively. The companies outperformed the industry’s ROE of 9.76%.
Utility companies generally distribute dividends. Currently, the dividend yield for Entergy is pegged at 4.46%, while Edison International’s dividend yield is 5.17%. Both the company’s dividend yield is better than the industry’s 3.67%. Notably, the same for the Zacks S&P 500 composite is 2.53%.
Even though both these companies are efficiently providing services to customers and should be retained in one’s portfolio, the above-mentioned comparisons put Entergy ahead of Edison International.
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Entergy Corporation (ETR) : Free Stock Analysis Report
Edison International (EIX) : Free Stock Analysis Report
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