Analyzing NorthWestern (NASDAQ:NWE) and Otter Tail (NASDAQ:OTTR)

Otter Tail (NASDAQ:OTTR) and NorthWestern (NASDAQ:NWE) are both mid-cap utilities companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, risk, dividends, institutional ownership, analyst recommendations, profitability and earnings.

Earnings and Valuation

This table compares Otter Tail and NorthWestern”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Otter Tail	$1.30 billion	2.88	$275.89 million	$6.67	13.39
NorthWestern	$1.61 billion	2.72	$181.09 million	$2.72	26.17

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Otter Tail	21.34%	15.21%	7.13%
NorthWestern	10.21%	7.80%	2.69%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Otter Tail and NorthWestern, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Otter Tail	0	1	1	1	3.00
NorthWestern	1	2	3	0	2.33

Otter Tail currently has a consensus price target of $86.00, suggesting a potential downside of 3.73%. NorthWestern has a consensus price target of $68.30, suggesting a potential downside of 4.05%. Given Otter Tail’s stronger consensus rating and higher probable upside, research analysts plainly believe Otter Tail is more favorable than NorthWestern.

Institutional & Insider Ownership

61.3% of Otter Tail shares are owned by institutional investors. Comparatively, 96.1% of NorthWestern shares are owned by institutional investors. 2.0% of Otter Tail shares are owned by company insiders. Comparatively, 0.9% of NorthWestern shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Otter Tail pays an annual dividend of $2.31 per share and has a dividend yield of 2.6%. NorthWestern pays an annual dividend of $2.68 per share and has a dividend yield of 3.8%. Otter Tail pays out 34.6% of its earnings in the form of a dividend. NorthWestern pays out 98.5% 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 has increased its dividend for 12 consecutive years and NorthWestern has increased its dividend for 21 consecutive years. NorthWestern is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Otter Tail has a beta of 0.47, indicating that its share price is 53% less volatile than the S&P 500. Comparatively, NorthWestern has a beta of 0.35, indicating that its share price is 65% less volatile than the S&P 500.

Summary

Otter Tail beats NorthWestern on 12 of the 18 factors compared between the two stocks.

About Otter Tail

Otter Tail Corporation, together with its subsidiaries, engages in electric utility, manufacturing, and plastic pipe businesses in the United States. It operates through three segments: Electric, Manufacturing, and Plastics. The Electric segment produces, transmits, distributes, and sells electric energy in Minnesota, North Dakota, and South Dakota; and operates as a participant in the Midcontinent Independent System Operator markets. This segment generates electricity through coal, fuel oil, solar, wind, and natural gas. It serves approximately residential, commercial, and industrial customers. The Manufacturing segment engages in the contract machining, metal parts stamping, fabrication and painting, production of plastic thermoformed horticultural containers, life science and industrial packaging, and material handling components and extruded raw material stock for the recreational vehicle, lawn and garden, agricultural, construction, and industrial and energy equipment end markets. The Plastics segment manufactures polyvinyl chloride pipes for municipal water, rural water, wastewater, storm drainage and water reclamation system, and other uses for customers in the horticulture, medical and life sciences, industrial, recreation, and electronics industries. This segment markets its products to wholesalers and distributors through independent sales representatives, company salespersons, and customer service representatives. The company was formerly known as Otter Tail Power Company and changed its name to Otter Tail Corporation in 2001. Otter Tail Corporation was founded in 1907 and is headquartered in Fergus Falls, Minnesota.

About NorthWestern

NorthWestern Energy Group, Inc. provides electricity and natural gas to residential, commercial, and various industrial customers. It generates, purchases, transmits, and distributes electricity; and produces, purchases, stores, transmits, and distributes natural gas, as well as owns municipal franchises to provide natural gas service in the communities. The company operates 6,600 miles of electric transmission and 18,674 miles of electric distribution lines with approximately 395 transmission and distribution substations; and 2,235 miles of natural gas transmission and 5,155 miles of natural gas distribution lines with approximately 133 city gate stations in Montana. It also operates 1,310 miles of electric transmission and 2,365 miles of electric distribution lines in South Dakota with approximately 124 transmission and distribution substations; and 55 miles of natural gas transmission and 2,573 miles of natural gas distribution lines in South Dakota and Nebraska. The company provides electricity and/or natural gas to approximately 775,300 customers in Montana, South Dakota, Nebraska, and Yellowstone National Park. NorthWestern Energy Group, Inc. was founded in 1923 and is based in Sioux Falls, South Dakota.