Head-To-Head Survey: American Electric Power (NYSE:AEP) and Edison International (EIX)

Edison International (NYSE: EIX) and American Electric Power (NYSE:AEP) are both large-cap utilities companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, profitability, earnings, analyst recommendations, institutional ownership and dividends.

Earnings & Valuation

This table compares Edison International and American Electric Power’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Edison International $11.87 billion 1.71 $1.43 billion $4.38 14.23
American Electric Power $16.40 billion 2.06 $610.90 million $3.83 17.95

Edison International has higher earnings, but lower revenue than American Electric Power. Edison International is trading at a lower price-to-earnings ratio than American Electric Power, indicating that it is currently the more affordable of the two stocks.

Dividends

Edison International pays an annual dividend of $2.42 per share and has a dividend yield of 3.9%. American Electric Power pays an annual dividend of $2.48 per share and has a dividend yield of 3.6%. Edison International pays out 55.3% of its earnings in the form of a dividend. American Electric Power pays out 64.8% 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. Edison International has increased its dividend for 5 consecutive years and American Electric Power has increased its dividend for 13 consecutive years. Edison International is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Edison International has a beta of 0.24, suggesting that its share price is 76% less volatile than the S&P 500. Comparatively, American Electric Power has a beta of 0.3, suggesting that its share price is 70% less volatile than the S&P 500.

Profitability

This table compares Edison International and American Electric Power’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Edison International 13.18% 10.84% 2.99%
American Electric Power 12.21% 9.67% 2.73%

Insider and Institutional Ownership

81.1% of Edison International shares are owned by institutional investors. Comparatively, 71.0% of American Electric Power shares are owned by institutional investors. 0.4% of Edison International shares are owned by company insiders. Comparatively, 0.2% of American Electric Power shares are owned 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.

Analyst Ratings

This is a breakdown of current recommendations for Edison International and American Electric Power, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Edison International 1 8 5 0 2.29
American Electric Power 1 6 6 0 2.38

Edison International presently has a consensus target price of $81.42, indicating a potential upside of 30.64%. American Electric Power has a consensus target price of $75.08, indicating a potential upside of 9.24%. Given Edison International’s higher probable upside, analysts plainly believe Edison International is more favorable than American Electric Power.

Summary

Edison International beats American Electric Power on 10 of the 17 factors compared between the two stocks.

About Edison International

Edison International is the holding company of Southern California Edison Company (SCE). As of December 31, 2016, SCE, a public utility, was primarily engaged in the business of supplying and delivering electricity to an approximately 50,000 square mile area of southern California. The Company is also the parent company of Edison Energy Group, Inc. (Edison Energy Group), a holding company for subsidiaries engaged in pursuing competitive business opportunities across energy services and distributed solar to commercial and industrial customers. SCE’s projects include West of Devers, Mesa Substation, Alberhill System, Riverside Transmission Reliability, Eldorado-Lugo-Mohave Upgrade, Tehachapi and Coolwater-Lugo. As of December 31, 2016, the West of Devers Project consisted of upgrading and reconfiguring approximately 48 miles of existing 220 kilovolt (kV) transmission lines between the Devers, El Casco, Vista and San Bernardino substations.

About American Electric Power

American Electric Power Company, Inc. (AEP) is a public utility holding company that owns, directly or indirectly, all of the outstanding common stock of its public utility subsidiaries and varying percentages of other subsidiaries. The service areas of the Company’s public utility subsidiaries cover the states of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. The Company’s segments include Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing. AEP’s vertically integrated utility operations are engaged in the generation, transmission and distribution of electricity for sale to retail and wholesale customers. Transmission and Distribution Utilities segment consists of the transmission and distribution of electricity for sale to retail and wholesale customers. AEP Transmission Holdco develops, constructs and operates transmission facilities.

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