Peabody Energy (NYSE:BTU) vs. Canadian Natural Resources (NYSE:CNQ) Critical Analysis

Canadian Natural Resources (NYSE:CNQ) and Peabody Energy (NYSE:BTU) are both energy companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, dividends, profitability, earnings, analyst recommendations, risk and valuation.

Profitability

This table compares Canadian Natural Resources and Peabody Energy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Canadian Natural Resources	22.78%	23.91%	11.45%
Peabody Energy	-4.56%	-5.22%	-3.22%

Volatility and Risk

Canadian Natural Resources has a beta of 0.53, indicating that its stock price is 47% less volatile than the S&P 500. Comparatively, Peabody Energy has a beta of 0.33, indicating that its stock price is 67% less volatile than the S&P 500.

Earnings & Valuation

This table compares Canadian Natural Resources and Peabody Energy”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Canadian Natural Resources	$31.61 billion	3.14	$7.74 billion	$4.05	11.94
Peabody Energy	$3.86 billion	0.80	-$52.90 million	($1.50)	-16.97

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

Dividends

Canadian Natural Resources pays an annual dividend of $1.80 per share and has a dividend yield of 3.7%. Peabody Energy pays an annual dividend of $0.30 per share and has a dividend yield of 1.2%. Canadian Natural Resources pays out 44.4% of its earnings in the form of a dividend. Peabody Energy pays out -20.0% 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. Canadian Natural Resources has raised its dividend for 24 consecutive years and Peabody Energy has raised its dividend for 1 consecutive years. Canadian Natural Resources is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

74.0% of Canadian Natural Resources shares are owned by institutional investors. Comparatively, 87.4% of Peabody Energy shares are owned by institutional investors. 5.0% of Canadian Natural Resources shares are owned by insiders. Comparatively, 0.5% of Peabody Energy shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current recommendations and price targets for Canadian Natural Resources and Peabody Energy, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Canadian Natural Resources	0	5	7	0	2.58
Peabody Energy	1	3	2	0	2.17

Canadian Natural Resources presently has a consensus target price of $57.00, suggesting a potential upside of 17.89%. Peabody Energy has a consensus target price of $33.88, suggesting a potential upside of 33.05%. Given Peabody Energy’s higher probable upside, analysts clearly believe Peabody Energy is more favorable than Canadian Natural Resources.

Summary

Canadian Natural Resources beats Peabody Energy on 14 of the 17 factors compared between the two stocks.

About Canadian Natural Resources

Canadian Natural Resources Limited acquires, explores for, develops, produces, markets, and sells crude oil, natural gas, and natural gas liquids (NGLs). The company offers light and medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen (thermal oil), and synthetic crude oil (SCO). The company’s midstream assets include two pipeline systems; and a 50% working interest in an 84-megawatt cogeneration plant at Primrose. It operates primarily in Western Canada; the United Kingdom portion of the North Sea; and Offshore Africa. The company was formerly known as AEX Minerals Corporation and changed its name to Canadian Natural Resources Limited in December 1975. Canadian Natural Resources Limited was incorporated in 1973 and is headquartered in Calgary, Canada.

About Peabody Energy

Peabody Energy Corporation engages in coal mining business in the United States, Japan, Taiwan, Australia, India, Brazil, Belgium, Chile, France, Indonesia, China, Vietnam, South Korea, Germany, and internationally. The company operates through Seaborne Thermal, Seaborne Metallurgical, Powder River Basin, Other U.S. Thermal, and Corporate and Other segments. It is involved in the mining, preparation, and sale of thermal coal primarily to electric utilities; mining bituminous and sub-bituminous coal deposits; low sulfur and high British thermal unit thermal coal; and mining metallurgical coal, such as hard coking coal, semi-hard coking coal, semi-soft coking coal, and pulverized coal injection coal. The company supplies coal primarily to electricity generators, industrial facilities, and steel manufacturers. It also engages in marketing and brokering of coal from other coal producers; trading of coal and freight-related contracts, as well as provides transportation-related services. The company was founded in 1883 and is headquartered in Saint Louis, Missouri.