Critical Analysis: Westar Energy (WR) versus Great Plains Energy (GXP)

Westar Energy (NYSE: WR) and Great Plains Energy (NYSE:GXP) are both mid-cap utilities companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, dividends, valuation, risk, profitability and institutional ownership.

Insider and Institutional Ownership

73.7% of Westar Energy shares are owned by institutional investors. Comparatively, 87.9% of Great Plains Energy shares are owned by institutional investors. 0.7% of Westar Energy shares are owned by company insiders. Comparatively, 0.4% of Great Plains Energy shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Westar Energy has a beta of 0.39, meaning that its stock price is 61% less volatile than the S&P 500. Comparatively, Great Plains Energy has a beta of 0.44, meaning that its stock price is 56% less volatile than the S&P 500.

Dividends

Westar Energy pays an annual dividend of $1.60 per share and has a dividend yield of 3.1%. Great Plains Energy pays an annual dividend of $1.10 per share and has a dividend yield of 3.5%. Westar Energy pays out 67.2% of its earnings in the form of a dividend. Great Plains Energy pays out 105.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Westar Energy has increased its dividend for 6 consecutive years and Great Plains Energy has increased its dividend for 11 consecutive years. Great Plains Energy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and target prices for Westar Energy and Great Plains Energy, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Westar Energy 0 0 4 0 3.00
Great Plains Energy 0 3 4 0 2.57

Westar Energy currently has a consensus target price of $55.33, suggesting a potential upside of 6.14%. Great Plains Energy has a consensus target price of $31.40, suggesting a potential downside of 1.47%. Given Westar Energy’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Westar Energy is more favorable than Great Plains Energy.

Valuation & Earnings

This table compares Westar Energy and Great Plains Energy’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Westar Energy $2.55 billion 2.90 $1.06 billion $2.38 21.90
Great Plains Energy $2.69 billion 2.55 $1.11 billion $1.04 30.64

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

Profitability

This table compares Westar Energy and Great Plains Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Westar Energy 13.33% 8.87% 2.97%
Great Plains Energy 8.00% 5.62% 1.82%

Summary

Westar Energy beats Great Plains Energy on 10 of the 16 factors compared between the two stocks.

Westar Energy Company Profile

Westar Energy, Inc. is an electric utility. The Company provides electric generation, transmission and distribution services. The Company provides these services in central and northeastern Kansas, including the cities of Topeka, Lawrence, Manhattan, Salina and Hutchinson. Its subsidiary, Kansas Gas and Electric Company (KGE), provides these services in south-central and southeastern Kansas, including the city of Wichita. Both the Company and KGE conduct business using the name Westar Energy. The Company supplies electric energy at retail to customers in Kansas. The Company also supplies electric energy at wholesale to municipalities and electric cooperatives in Kansas, and has contracts for the sale or purchase of wholesale electricity with other utilities. As of December 31, 2016, it had 6,292 megawatts (MW) of generating capacity in service.

Great Plains Energy Company Profile

Great Plains Energy Incorporated (Great Plains Energy) is a utility holding company. The Company operates through electric utility segment. The Company’s subsidiaries with operations include Kansas City Power & Light Company (KCP&L) and KCP&L Greater Missouri Operations Company (GMO). KCP&L is an integrated, regulated electric utility that provides electricity to customers primarily in the states of Missouri and Kansas. Kansas City Power & Light Receivables Company (KCP&L Receivables Company) is the KCP&L’s subsidiary. GMO is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri. GMO also provides regulated steam service to certain customers in the St. Joseph, Missouri area. GMO’s subsidiaries include GMO Receivables Company and MPS Merchant Services, Inc. (MPS Merchant). As of December 31, 2016, electric utility had approximately 6,500 megawatts (MWs) of owned generating capacity.

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