Financial Analysis: Duke Energy (NYSE:DUK) versus Otter Tail (NASDAQ:OTTR)

Otter Tail (NASDAQ:OTTR) and Duke Energy (NYSE:DUK) are both utilities companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, risk, profitability, analyst recommendations and institutional ownership.

Valuation and Earnings

This table compares Otter Tail and Duke Energy”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Otter Tail	$1.30 billion	2.88	$275.89 million	$4.64	19.25
Duke Energy	$33.25 billion	2.66	$4.97 billion	$6.66	17.02

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

Dividends

Otter Tail pays an annual dividend of $2.31 per share and has a dividend yield of 2.6%. Duke Energy pays an annual dividend of $4.34 per share and has a dividend yield of 3.8%. Otter Tail pays out 49.8% of its earnings in the form of a dividend. Duke Energy pays out 65.2% 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. Otter Tail has increased its dividend for 12 consecutive years and Duke Energy has increased its dividend for 20 consecutive years. Duke Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Otter Tail and Duke Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Otter Tail	14.83%	14.56%	6.70%
Duke Energy	15.78%	9.78%	2.67%

Insider and Institutional Ownership

61.3% of Otter Tail shares are owned by institutional investors. Comparatively, 65.3% of Duke Energy shares are owned by institutional investors. 2.0% of Otter Tail shares are owned by company insiders. Comparatively, 0.1% of Duke Energy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

Otter Tail has a beta of 0.44, suggesting that its share price is 56% less volatile than the S&P 500. Comparatively, Duke Energy has a beta of 0.37, suggesting that its share price is 63% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Otter Tail and Duke Energy, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Otter Tail	1	4	0	0	1.80
Duke Energy	0	8	10	0	2.56

Otter Tail presently has a consensus price target of $86.00, indicating a potential downside of 3.74%. Duke Energy has a consensus price target of $137.56, indicating a potential upside of 21.34%. Given Duke Energy’s stronger consensus rating and higher possible upside, analysts clearly believe Duke Energy is more favorable than Otter Tail.

Summary

Duke Energy beats Otter Tail on 10 of the 17 factors compared between the two stocks.

About Otter Tail

Otter Tail Corporation, together with its subsidiaries, engages in electric utility, manufacturing, and plastic pipe businesses in the United States. It operates through three segments: Electric, Manufacturing, and Plastics. The Electric segment produces, transmits, distributes, and sells electric energy in Minnesota, North Dakota, and South Dakota; and operates as a participant in the Midcontinent Independent System Operator markets. This segment generates electricity through coal, fuel oil, solar, wind, and natural gas. It serves approximately residential, commercial, and industrial customers. The Manufacturing segment engages in the contract machining, metal parts stamping, fabrication and painting, production of plastic thermoformed horticultural containers, life science and industrial packaging, and material handling components and extruded raw material stock for the recreational vehicle, lawn and garden, agricultural, construction, and industrial and energy equipment end markets. The Plastics segment manufactures polyvinyl chloride pipes for municipal water, rural water, wastewater, storm drainage and water reclamation system, and other uses for customers in the horticulture, medical and life sciences, industrial, recreation, and electronics industries. This segment markets its products to wholesalers and distributors through independent sales representatives, company salespersons, and customer service representatives. The company was formerly known as Otter Tail Power Company and changed its name to Otter Tail Corporation in 2001. Otter Tail Corporation was founded in 1907 and is headquartered in Fergus Falls, Minnesota.

About Duke Energy

Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States. It operates through two segments: Electric Utilities and Infrastructure (EU&I), and Gas Utilities and Infrastructure (GU&I). The EU&I segment generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest. It generates electricity through coal, hydroelectric, natural gas, oil, solar and wind sources, renewables, and nuclear fuel. This segment also engages in the wholesale of electricity to municipalities, electric cooperative utilities, and load-serving entities. The GU&I segment distributes natural gas to residential, commercial, industrial, and power generation natural gas customers; and invests in pipeline transmission projects, renewable natural gas projects, and natural gas storage facilities. The company was formerly known as Duke Energy Holding Corp. and changed its name to Duke Energy Corporation in April 2006. Duke Energy Corporation was founded in 1904 and is headquartered in Charlotte, North Carolina.