Nextera Energy Partners (NYSE:NEP) vs. Pinnacle West Capital (NYSE:PNW) Critical Review

Pinnacle West Capital (NYSE:PNW) and Nextera Energy Partners (NYSE:NEP) are both utilities companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, profitability, valuation, institutional ownership, dividends, risk and analyst recommendations.

Volatility and Risk

Pinnacle West Capital has a beta of 0.43, meaning that its share price is 57% less volatile than the S&P 500. Comparatively, Nextera Energy Partners has a beta of 1.03, meaning that its share price is 3% more volatile than the S&P 500.

Valuation & Earnings

This table compares Pinnacle West Capital and Nextera Energy Partners”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pinnacle West Capital	$5.21 billion	2.05	$501.56 million	$5.03	17.73
Nextera Energy Partners	$1.23 billion	0.00	-$10.00 million	($0.10)	N/A

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

Profitability

This table compares Pinnacle West Capital and Nextera Energy Partners’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Pinnacle West Capital	12.26%	9.60%	2.43%
Nextera Energy Partners	-0.73%	1.34%	0.85%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Pinnacle West Capital and Nextera Energy Partners, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pinnacle West Capital	0	7	3	0	2.30
Nextera Energy Partners	2	0	0	0	1.00

Pinnacle West Capital presently has a consensus price target of $97.00, suggesting a potential upside of 8.74%. Nextera Energy Partners has a consensus price target of $10.00, suggesting a potential upside of 0.00%. Given Pinnacle West Capital’s stronger consensus rating and higher probable upside, analysts plainly believe Pinnacle West Capital is more favorable than Nextera Energy Partners.

Dividends

Pinnacle West Capital pays an annual dividend of $3.58 per share and has a dividend yield of 4.0%. Nextera Energy Partners pays an annual dividend of $3.67 per share. Pinnacle West Capital pays out 71.2% of its earnings in the form of a dividend. Nextera Energy Partners pays out -3,670.0% 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. Nextera Energy Partners has increased its dividend for 10 consecutive years.

Institutional and Insider Ownership

91.5% of Pinnacle West Capital shares are held by institutional investors. Comparatively, 66.0% of Nextera Energy Partners shares are held by institutional investors. 0.2% of Pinnacle West Capital shares are held by insiders. Comparatively, 0.1% of Nextera Energy Partners shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Summary

Pinnacle West Capital beats Nextera Energy Partners on 13 of the 16 factors compared between the two stocks.

About Pinnacle West Capital

Pinnacle West Capital Corporation, through its subsidiary, provides retail and wholesale electric services primarily in the state of Arizona. The company engages in the generation, transmission, and distribution of electricity using coal, nuclear, gas, oil, and solar generating facilities. Its transmission facilities include overhead lines and underground lines; and distribution facilities consist of overhead lines and underground primary cables. The company also owns and maintains transmission and distribution substations; and owns energy storage facilities. Pinnacle West Capital Corporation was incorporated in 1985 and is headquartered in Phoenix, Arizona.

About Nextera Energy Partners

NextEra Energy Partners LP engages in the acquisition, management, and ownership of contracted clean energy projects with long-term cash flows. It owns interests in wind and solar projects in North America and natural gas infrastructure assets in Texas. The company was founded on March 6, 2014 and is headquartered in Juno Beach, FL.