Critical Review: OGE Energy (OGE) & PPL (NYSE:PPL)

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PPL (NYSE:PPL) and OGE Energy (NYSE:OGE) are both utilities companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, risk, valuation, profitability, dividends, analyst recommendations and institutional ownership.

Earnings & Valuation

This table compares PPL and OGE Energy’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PPL $7.45 billion 3.06 $1.13 billion $2.25 14.08
OGE Energy $2.26 billion 3.38 $619.00 million $1.92 19.91

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

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for PPL and OGE Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PPL 1 5 5 0 2.36
OGE Energy 1 3 2 0 2.17

PPL presently has a consensus price target of $34.20, suggesting a potential upside of 7.92%. OGE Energy has a consensus price target of $36.60, suggesting a potential downside of 4.26%. Given PPL’s stronger consensus rating and higher probable upside, research analysts clearly believe PPL is more favorable than OGE Energy.

Institutional and Insider Ownership

80.2% of PPL shares are owned by institutional investors. Comparatively, 61.2% of OGE Energy shares are owned by institutional investors. 0.4% of PPL shares are owned by insiders. Comparatively, 0.4% of OGE Energy shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares PPL and OGE Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PPL 19.17% 15.23% 4.03%
OGE Energy 28.26% 10.74% 3.90%

Dividends

PPL pays an annual dividend of $1.64 per share and has a dividend yield of 5.2%. OGE Energy pays an annual dividend of $1.46 per share and has a dividend yield of 3.8%. PPL pays out 72.9% of its earnings in the form of a dividend. OGE Energy pays out 76.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PPL has raised its dividend for 6 consecutive years and OGE Energy has raised its dividend for 11 consecutive years. PPL is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

PPL has a beta of 0.4, indicating that its share price is 60% less volatile than the S&P 500. Comparatively, OGE Energy has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500.

Summary

PPL beats OGE Energy on 11 of the 17 factors compared between the two stocks.

About PPL

PPL Corporation, a utility holding company, delivers electricity and natural gas in the United States and the United Kingdom. The company operates in three segments: U.K. Regulated, Kentucky Regulated, and Pennsylvania Regulated. It serves 411,000 electric and 326,000 natural gas customers in Louisville and adjacent areas in Kentucky; 525,000 customers in central, southeastern, and western Kentucky; and approximately 28,000 customers in 5 counties in southwestern Virginia, and 3 customers in Tennessee. The company also provides electric delivery services to approximately 1.4 million customers in Pennsylvania; and operates electricity distribution networks in the United Kingdom, as well as delivers natural gas to customers in Kentucky; generates electricity from power plants in Kentucky; and sells wholesale electricity to 10 municipalities in Kentucky. PPL Corporation was founded in 1920 and is headquartered in Allentown, Pennsylvania.

About OGE Energy

OGE Energy Corp., together with its subsidiaries, operates as an energy and energy services provider that offers physical delivery and related services for electricity and natural gas primarily in the south central United States. The company operates in two segments, Electric Utility and Natural Gas Midstream Operations. The Electric Utility segment generates, transmits, distributes, and sells electric energy in Oklahoma and western Arkansas. This segment furnishes retail electric service in 267 communities and their contiguous rural and suburban areas; and owns and operates coal-fired, natural gas-fired, wind-powered, and solar-powered generating facilities. The Natural Gas Midstream Operations segment is involved in gathering, processing, transporting, and storing natural gas; and the provision of crude oil gathering services, and interstate and intrastate natural gas pipeline transportation and storage services to natural gas producers, industrial end users, and natural gas marketers. As of December 31, 2017, the company owned and operated interconnected electric generation, transmission, and distribution system, including 10 generating stations with an aggregate capability of 6,304 megawatts; and a transmission system comprising 52 substations and 4,949 structure miles of lines in Oklahoma, and 7 substations and 277 structure miles of lines in Arkansas. Its distribution system consisted of 346 substations, 29,317 structure miles of overhead lines, 2,824 miles of underground conduit, and 10,875 miles of underground conductors in Oklahoma, as well as 30 substations, 2,785 structure miles of overhead lines, 282 miles of underground conduit, and 689 miles of underground conductors in Arkansas. OGE Energy Corp. was founded in 1995 and is headquartered in Oklahoma City, Oklahoma.

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