Otter Tail Corporation (OTTR) and WEC Energy Group (WEC) Critical Analysis

Otter Tail Corporation (NASDAQ: OTTR) and WEC Energy Group (NYSE:WEC) are both utilities companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, earnings, valuation, risk, dividends, analyst recommendations and institutional ownership.

Analyst Recommendations

This is a summary of recent recommendations for Otter Tail Corporation and WEC Energy Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Otter Tail Corporation	0	1	1	0	2.50
WEC Energy Group	1	5	1	0	2.00

Otter Tail Corporation presently has a consensus target price of $41.00, suggesting a potential downside of 2.15%. WEC Energy Group has a consensus target price of $62.50, suggesting a potential downside of 3.99%. Given Otter Tail Corporation’s stronger consensus rating and higher probable upside, equities analysts plainly believe Otter Tail Corporation is more favorable than WEC Energy Group.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Otter Tail Corporation	8.35%	10.14%	3.57%
WEC Energy Group	12.72%	10.75%	3.23%

Dividends

Otter Tail Corporation pays an annual dividend of $1.28 per share and has a dividend yield of 3.1%. WEC Energy Group pays an annual dividend of $2.08 per share and has a dividend yield of 3.2%. Otter Tail Corporation pays out 74.4% of its earnings in the form of a dividend. WEC Energy Group pays out 68.4% 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 Corporation has raised its dividend for 6 consecutive years. WEC Energy Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Otter Tail Corporation and WEC Energy Group’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Otter Tail Corporation	$820.02 million	2.02	$191.22 million	$1.72	24.36
WEC Energy Group	$7.61 billion	2.70	$2.51 billion	$3.04	21.41

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

Insider & Institutional Ownership

39.4% of Otter Tail Corporation shares are held by institutional investors. Comparatively, 70.8% of WEC Energy Group shares are held by institutional investors. 1.4% of Otter Tail Corporation shares are held by company insiders. Comparatively, 1.0% of WEC Energy Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Risk & Volatility

Otter Tail Corporation has a beta of 0.78, suggesting that its share price is 22% less volatile than the S&P 500. Comparatively, WEC Energy Group has a beta of 0.11, suggesting that its share price is 89% less volatile than the S&P 500.

Summary

WEC Energy Group beats Otter Tail Corporation on 9 of the 16 factors compared between the two stocks.

About Otter Tail Corporation

Otter Tail Corporation is a holding company. The Company operates through three segments: Electric, Manufacturing and Plastics. The Electric segment includes the production, transmission, distribution and sale of electric energy in Minnesota, North Dakota and South Dakota by Otter Tail Power Company (OTP). The Manufacturing segment consists of businesses in manufacturing activities, such as contract machining, metal parts stamping, fabrication and painting, and production of material and handling trays and horticultural containers. These businesses have manufacturing facilities in Georgia, Illinois and Minnesota and sell products primarily in the United States. The Plastics segment consists of businesses producing polyvinyl chloride (PVC) pipe at plants in North Dakota and Arizona. The PVC pipe is sold primarily in the upper Midwest and Southwest regions of the United States. The Company’s manufacturing and plastic pipe businesses are owned by its subsidiary, Varistar Corporation.

About WEC Energy Group

WEC Energy Group, Inc. was a diversified holding company with natural gas and electric utility operations, an approximately 60% equity ownership interest in American Transmission Company LLC, and non-utility electric operations through its We Power business, as of December 31, 2016. Its segments include Wisconsin; Illinois; Other States; Electric Transmission; We Power, and Corporate and Other. Wisconsin includes the electric and natural gas utility operations of Wisconsin Electric Power Company, Wisconsin Gas LLC, and Wisconsin Public Service Corporation, including WE’s and WPS’s electric and natural gas operations in the state of Michigan. Illinois includes the natural gas utility and non-utility operations of The Peoples Gas Light and Coke Company and North Shore Gas Company. Other states includes the natural gas utility and non-utility operations of Minnesota Energy Resources Corporation and Michigan Gas Utilities Corporation.