Critical Contrast: AZZ (NYSE:AZZ) and Franklin Electric (NASDAQ:FELE)

AZZ (NYSE:AZZ) and Franklin Electric (NASDAQ:FELE) are both mid-cap industrials companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, analyst recommendations, valuation, profitability, dividends, earnings and risk.

Earnings & Valuation

This table compares AZZ and Franklin Electric”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AZZ	$1.59 billion	2.00	$128.83 million	$10.40	10.19
Franklin Electric	$2.02 billion	2.03	$180.31 million	$3.07	30.05

Franklin Electric has higher revenue and earnings than AZZ. AZZ is trading at a lower price-to-earnings ratio than Franklin Electric, indicating that it is currently the more affordable of the two stocks.

Dividends

AZZ pays an annual dividend of $0.80 per share and has a dividend yield of 0.8%. Franklin Electric pays an annual dividend of $1.06 per share and has a dividend yield of 1.1%. AZZ pays out 7.7% of its earnings in the form of a dividend. Franklin Electric pays out 34.5% 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. Franklin Electric has raised its dividend for 33 consecutive years. Franklin Electric is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

AZZ has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500. Comparatively, Franklin Electric has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500.

Insider and Institutional Ownership

90.9% of AZZ shares are held by institutional investors. Comparatively, 80.0% of Franklin Electric shares are held by institutional investors. 1.8% of AZZ shares are held by company insiders. Comparatively, 2.7% of Franklin Electric shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares AZZ and Franklin Electric’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AZZ	19.69%	15.01%	7.78%
Franklin Electric	6.71%	14.24%	9.46%

Analyst Ratings

This is a summary of recent recommendations and price targets for AZZ and Franklin Electric, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AZZ	0	3	6	1	2.80
Franklin Electric	0	2	0	0	2.00

AZZ currently has a consensus target price of $116.33, suggesting a potential upside of 9.75%. Franklin Electric has a consensus target price of $112.00, suggesting a potential upside of 21.42%. Given Franklin Electric’s higher probable upside, analysts clearly believe Franklin Electric is more favorable than AZZ.

About AZZ

AZZ Inc. provides hot-dip galvanizing and coil coating solutions in North America. It offers metal finishing solutions for corrosion protection, including hot-dip galvanizing, spin galvanizing, powder coating, anodizing, and plating to steel fabrication and other industries, as well as to fabricators or manufacturers that provide services to the transmission and distribution, bridge and highway, petrochemical, and general industrial markets; and original equipment manufacturers. It also provides aesthetic and corrosion protective coatings and related value-added services for steel and aluminum coil primarily serving the construction; appliance; heating, ventilation, and air conditioning; container; transportation; and other end markets. The company was incorporated in 1956 and is headquartered in Fort Worth, Texas.

About Franklin Electric

Franklin Electric Co., Inc., together with its subsidiaries, designs, manufactures, and distributes water and fuel pumping systems worldwide. The company operates through Water Systems, Fueling Systems, and Distribution segments. The Water Systems segment offers submersible motors, drives, pumps, electronic controls, water treatment systems, monitoring devices, and related parts and equipment. Its motors and pumps are used principally for pumping clean water and wastewater in various residential, agricultural, municipal, and industrial applications; and manufactures electronic drives and controls that are used in motors for controlling functionality, as well as provides protection from various hazards, such as electrical surges, over-heating, and dry wells or tanks. The Fueling Systems segment provides pumps, pipes, sumps, fittings, vapor recovery components, electronic controls, monitoring devices, and related parts and equipment primarily for use in fueling system applications. This segment serves other energy markets, such as power reliability systems, as well as includes electronic devices for online monitoring of the power utility, hydroelectric, and telecommunication and data center infrastructure. The Distribution segment sells to and provides presale support and specifications to the installing contractors. It sells products produced by the Water Systems segment. The company sells its products to wholesale and retail distributors, specialty distributors, original equipment manufacturers, industrial and petroleum equipment distributors, and oil and utility companies through its employee sales force and independent manufacturing representatives. Franklin Electric Co., Inc. was founded in 1944 and is headquartered in Fort Wayne, Indiana.