Critical Analysis: PNM Resources (PNM) & NextEra Energy (NEE)

PNM Resources (NYSE: NEE) and NextEra Energy (NYSE:NEE) are both utilities companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, profitability, risk, earnings and valuation.

Analyst Recommendations

This is a summary of recent ratings for PNM Resources and NextEra Energy, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PNM Resources 5 4 0 0 1.44
NextEra Energy 0 3 10 0 2.77

PNM Resources presently has a consensus target price of $37.61, suggesting a potential downside of 5.85%. NextEra Energy has a consensus target price of $166.50, suggesting a potential downside of 3.95%. Given NextEra Energy’s stronger consensus rating and higher possible upside, analysts clearly believe NextEra Energy is more favorable than PNM Resources.

Institutional & Insider Ownership

91.8% of PNM Resources shares are held by institutional investors. Comparatively, 76.3% of NextEra Energy shares are held by institutional investors. 1.3% of PNM Resources shares are held by insiders. Comparatively, 0.6% of NextEra Energy shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Volatility & Risk

PNM Resources has a beta of 0.16, indicating that its stock price is 84% less volatile than the S&P 500. Comparatively, NextEra Energy has a beta of 0.18, indicating that its stock price is 82% less volatile than the S&P 500.

Valuation and Earnings

This table compares PNM Resources and NextEra Energy’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PNM Resources $1.45 billion 2.20 $80.40 million $1.94 20.59
NextEra Energy $17.20 billion 4.77 $5.38 billion $6.70 25.94

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

Profitability

This table compares PNM Resources and NextEra Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PNM Resources 5.12% 8.58% 2.29%
NextEra Energy 49.10% 10.49% 3.52%

Dividends

PNM Resources pays an annual dividend of $1.06 per share and has a dividend yield of 2.7%. NextEra Energy pays an annual dividend of $4.44 per share and has a dividend yield of 2.6%. PNM Resources pays out 54.6% of its earnings in the form of a dividend. NextEra Energy pays out 66.3% 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. PNM Resources has raised its dividend for 6 consecutive years and NextEra Energy has raised its dividend for 8 consecutive years. PNM Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

NextEra Energy beats PNM Resources on 13 of the 17 factors compared between the two stocks.

PNM Resources Company Profile

PNM Resources, Inc., through its subsidiaries, engages in the energy and energy-related businesses in the United States. It operates through Public Service Company of New Mexico (PNM) and Texas-New Mexico Power Company (TNMP) segments. The PNM segment is primarily involved in the generation, transmission, and distribution of electricity. It generates electricity using coal, natural gas and oil, nuclear fuel, solar, wind, and geothermal energy sources. As of December 31, 2017, this segment had owned or leased facilities with a total net generation capacity of 2,102 megawatts; and owned 3,200 miles of electric transmission lines, 6,063 miles of distribution overhead lines, 5,828 miles of underground distribution lines, and 254 substations. It also owns and leases office and other equipment, office space, vehicles, and real estate. The TNMP segment provides regulated transmission and distribution services. As of December 31, 2017, this segment owned 978 miles of overhead electric transmission lines, 7,111 miles of overhead distribution lines, 1,241 miles of underground distribution lines, and 116 substations. It also owns and leases vehicles, service facilities, and office locations throughout its service territory. The company serves approximately 773,000 residential, commercial, and industrial customers, as well as end-users of electricity in New Mexico and Texas. PNM Resources, Inc. was founded in 1917 and is headquartered in Albuquerque, New Mexico.

NextEra Energy Company Profile

NextEra Energy, Inc., through its subsidiaries, generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear, and natural gas-fired facilities. It also provides risk management services related to power and gas consumption. As of February 16, 2018, the company operated approximately 46,790 megawatts of net generating capacity. As of December 31, 2017, it served approximately 10 million people through approximately 5 million customer accounts in the east and lower west coasts of Florida with approximately 75,000 circuit miles of transmission and distribution lines and approximately 620 substations. The company was formerly known as FPL Group, Inc. and changed its name to NextEra Energy, Inc. in 2010. NextEra Energy, Inc. was founded in 1925 and is headquartered in Juno Beach, Florida.

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