Critical Review: TECO Energy (TE) and Otter Tail (NASDAQ:OTTR)

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

Insider and Institutional Ownership

41.0% of Otter Tail shares are held by institutional investors. 1.4% of Otter Tail shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
TECO Energy 0.84% 0.85% 0.24%
Otter Tail 8.21% 10.34% 3.65%

Earnings and Valuation

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TECO Energy N/A N/A N/A $1.06 26.08
Otter Tail $803.54 million 2.04 $62.32 million $1.80 23.06

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

Dividends

TECO Energy pays an annual dividend of $0.92 per share and has a dividend yield of 3.3%. Otter Tail pays an annual dividend of $1.28 per share and has a dividend yield of 3.1%. TECO Energy pays out 86.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Otter Tail pays out 71.1% of its earnings in the form of a dividend. Otter Tail has raised its dividend for 3 consecutive years.

Analyst Recommendations

This is a summary of recent ratings and target prices for TECO Energy and Otter Tail, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TECO Energy 0 0 0 0 N/A
Otter Tail 0 3 0 0 2.00

Otter Tail has a consensus price target of $41.00, suggesting a potential downside of 1.20%. Given Otter Tail’s higher possible upside, analysts clearly believe Otter Tail is more favorable than TECO Energy.

Summary

Otter Tail beats TECO Energy on 10 of the 12 factors compared between the two stocks.

TECO Energy Company Profile

TECO Energy, Inc. (TECO Energy) is a holding company for regulated utilities and other businesses. TECO Energy holds all of the common stock of Tampa Electric Company (TEC) and through its subsidiary, New Mexico Gas Intermediate, Inc. (NMGI), owns New Mexico Gas Company, Inc. (NMGC). The Company’s segments include Tampa Electric, Peoples Gas System (PGS) and NMGC. Its Tampa Electric division is engaged in the generation, purchase, transmission, distribution and sale of electric energy. The retail territory served comprises an area of approximately 2,000 square miles in West Central Florida. PGS, the gas division of TEC, is engaged in the purchase, distribution and sale of natural gas for residential, commercial, industrial and electric power generation customers in the state of Florida. NMGC is engaged in the purchase, distribution and sale of natural gas for residential, commercial and industrial customers in the state of New Mexico.

Otter Tail Company Profile

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.

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