Pinnacle West Capital (NYSE:PNW) versus NiSource (NYSE:NI) Financial Analysis

Pinnacle West Capital (NYSE:PNW) and NiSource (NYSE:NI) are both large-cap utilities companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, institutional ownership, dividends, analyst recommendations, profitability, valuation and risk.

Analyst Ratings

This is a summary of recent recommendations and price targets for Pinnacle West Capital and NiSource, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pinnacle West Capital	0	13	3	0	2.19
NiSource	0	3	9	1	2.85

Pinnacle West Capital presently has a consensus price target of $103.00, suggesting a potential upside of 2.30%. NiSource has a consensus price target of $48.27, suggesting a potential upside of 3.02%. Given NiSource’s stronger consensus rating and higher possible upside, analysts clearly believe NiSource is more favorable than Pinnacle West Capital.

Institutional and Insider Ownership

91.5% of Pinnacle West Capital shares are held by institutional investors. Comparatively, 91.6% of NiSource shares are held by institutional investors. 0.2% of Pinnacle West Capital shares are held by company insiders. Comparatively, 0.4% of NiSource shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Risk and Volatility

Pinnacle West Capital has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500. Comparatively, NiSource has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.

Valuation & Earnings

This table compares Pinnacle West Capital and NiSource”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pinnacle West Capital	$5.34 billion	2.28	$616.53 million	$5.06	19.90
NiSource	$6.64 billion	3.38	$929.50 million	$1.95	24.03

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

Profitability

This table compares Pinnacle West Capital and NiSource’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Pinnacle West Capital	11.55%	8.82%	2.12%
NiSource	13.99%	8.07%	2.64%

Dividends

Pinnacle West Capital pays an annual dividend of $3.64 per share and has a dividend yield of 3.6%. NiSource pays an annual dividend of $1.20 per share and has a dividend yield of 2.6%. Pinnacle West Capital pays out 71.9% of its earnings in the form of a dividend. NiSource pays out 61.5% 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. NiSource has increased its dividend for 14 consecutive years.

Summary

NiSource beats Pinnacle West Capital on 15 of the 18 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 NiSource

NiSource Inc., an energy holding company, operates as a regulated natural gas and electric utility company in the United States. It operates in two segments, Gas Distribution Operations and Electric Operations. The company distributes natural gas to approximately 3.3 million customers through approximately 55,000 miles of distribution main pipeline and the associated individual customer service lines; and 1,000 miles of transmission main pipeline in northern Indiana, Ohio, Pennsylvania, Virginia, Kentucky, and Maryland. It also generates, transmits, and distributes electricity to approximately 0.5 million customers in various counties in the northern part of Indiana, as well as engages in wholesale electric and transmission transactions. It owns and operates coal-fired electric generating stations in Wheatfield and Michigan City; combined cycle gas turbine in West Terre Haute; natural gas generating units in Wheatfield; hydro generating plants in Carroll County and White County; wind generating units in White County, Indiana; and solar generating units in Jasper County and White County. The company was formerly known as NIPSCO Industries, Inc. and changed its name to NiSource Inc. in April 1999. NiSource Inc. was founded in 1847 and is headquartered in Merrillville, Indiana.