The coronavirus-induced crisis is aggravating with each passing day. With the number of infected and dead increasing, and no signs of abatement in sight, the investors are getting increasingly apprehensive about a market meltdown. In fact, the outbreak has put world economy under crisis.
Despite the scenario, the Utilities have been providing 24X7 basic services like electricity, water and natural gas to millions of customers. Notably, these stocks are less affected by economic disruption and are considered safe investment options. 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 crisis, Investors can take a look at these stocks.
Though returns from the overall sector are declining, Utilities players are staying afloat on the back of dividend payouts and share buybacks.
In this article, we run a comparative analysis on two Utility - Electric Power companies —Ameren Corporation (AEE - Free Report) and DTE Energy Company (DTE - Free Report) — 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.
Ameren has a market capitalization of $15.50 billion, while the same for DTE Energy is $15.98 billion.
Amid the current scenario, shares of most of the industry players are on the decline. However, if we consider the long-term period, these two stocks have outperformed the industry. In the last five years, Ameren’s shares have returned 51% against the industry's decline of 12%. Shares of DTE Energy have rallied 3.3%.
DTE Energy has an impressive VGM Score of B while Ameren 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.
The Zacks Consensus Estimate for Ameren’s 2020 earnings is pegged at $3.48 on revenues of $6.24 billion. This implies 3.88% and 5.57% increase of the bottom and the top line, respectively, from the year-ago reported figures.
The Zacks Consensus Estimate for DTE Energy’s 2020 earnings is pegged at $6.61 on revenues of $13.28 billion. This implies 4.92% and 4.80% increase of the bottom and the top line, respectively, from the year-ago reported figures.
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 Ameren and DTE Energy is 10.29% and 10.52%, respectively. The companies outperformed the industry’s ROE of 9.68%.
Utility companies generally distribute dividends. Currently, the dividend yield for Ameren is pegged at 3.15%, while DTE Energy’s dividend yield is 4.88%. Notably, the same for the Zacks S&P 500 composite is 2.79%.
Ameren has a trailing four-quarter positive earnings surprise of 7.67%, on average. Meanwhile, DTE Energy has a trailing four-quarter negative earnings surprise of 0.97%, on average.
Even though both these companies are efficiently servicing customers and should be retained in one’s portfolio, the above comparisons put DTE Energy ahead of Ameren currently.
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