Vistra or Southern Company: Which Utility Stock Offers Better Upside?

Core Insights - The Zacks Utility - Electric Power industry presents a compelling investment opportunity due to stable cash flows and regulated business models [1] - Companies are transitioning towards clean energy, investing in solar, wind, battery storage, and grid modernization, which enhances their market appeal [2] - The Southern Company and Vistra Corp. are key players in this transition, focusing on renewable energy investments [2] Company Overview - The Southern Company provides stable long-term value through regulated operations and strategic clean energy investments, benefiting from a diversified generation mix and a strong customer base [3] - Vistra Energy is becoming a significant player in nuclear energy, bolstered by its acquisition of Energy Harbor and the establishment of Vistra Vision for zero-carbon power generation [4] Earnings Growth Projections - Vistra's earnings per share estimates for 2025 and 2026 have increased by 3.7% and 2.84% respectively, with a long-term growth projection of 13.18% [6] - The Southern Company's earnings per share estimate for 2025 has decreased by 0.23%, while the 2026 estimate has increased by 0.22%, with a long-term growth projection of 6.55% [8] Financial Metrics - Vistra's return on equity (ROE) is significantly higher at 87.03% compared to The Southern Company's 12.7% [9] - The dividend yield for Vistra is 0.48%, while The Southern Company's yield is 3.26%, both lower than the industry average of 3.27% [13] Sales Estimates - Vistra's sales estimates for 2025 and 2026 reflect year-over-year growth of 28.91% and 4.53% respectively [14] - The Southern Company's sales estimates for the same years show growth of 5.84% and 3.7% respectively [14] Debt and Valuation - Vistra's debt-to-capital ratio is 77.12%, higher than The Southern Company's 64.83%, with the industry average at 60.81% [17] - Vistra is trading at a premium with a Price/Earnings Forward 12-month ratio of 26.29X compared to The Southern Company's 20.44X and the industry's 15.29X [18] Conclusion - The Southern Company has a marginal edge over Vistra due to lower debt usage, cheaper valuation, and higher dividend yield, despite both companies holding a Zacks Rank 3 (Hold) [20]