Reviewing Canadian Natural Resources (NYSE:CNQ) and SM Energy (NYSE:SM)

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

Dividends

Canadian Natural Resources pays an annual dividend of $2.53 per share and has a dividend yield of 4.7%. SM Energy pays an annual dividend of $0.30 per share and has a dividend yield of 1.0%. Canadian Natural Resources pays out 34.5% of its earnings in the form of a dividend. SM Energy pays out 3.4% 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 increased its dividend for 1 consecutive years and SM Energy has increased its dividend for 1 consecutive years.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Canadian Natural Resources	22.20%	33.18%	16.51%
SM Energy	33.11%	34.40%	16.36%

Institutional & Insider Ownership

70.9% of Canadian Natural Resources shares are owned by institutional investors. Comparatively, 89.5% of SM Energy shares are owned by institutional investors. 5.0% of Canadian Natural Resources shares are owned by company insiders. Comparatively, 1.6% of SM Energy shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Canadian Natural Resources and SM Energy’s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Canadian Natural Resources	$38.10 billion	1.55	$8.41 billion	$7.34	7.30
SM Energy	$3.36 billion	1.04	$1.11 billion	$8.95	3.20

Canadian Natural Resources has higher revenue and earnings than SM Energy. SM 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.

Volatility & Risk

Canadian Natural Resources has a beta of 1.57, suggesting that its share price is 57% more volatile than the S&P 500. Comparatively, SM Energy has a beta of 4.42, suggesting that its share price is 342% more volatile than the S&P 500.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Canadian Natural Resources	0	3	5	0	2.63
SM Energy	1	6	5	0	2.33

Canadian Natural Resources presently has a consensus price target of $92.91, suggesting a potential upside of 73.40%. SM Energy has a consensus price target of $42.18, suggesting a potential upside of 47.18%. Given Canadian Natural Resources’ stronger consensus rating and higher possible upside, analysts plainly believe Canadian Natural Resources is more favorable than SM Energy.

Summary

Canadian Natural Resources beats SM Energy on 9 of the 15 factors compared between the two stocks.

About Canadian Natural Resources

(Get Rating)

Canadian Natural Resources Ltd. is an oil and natural gas production company, which engages in the exploration, development, marketing, and production of crude oil and natural gas. It operates through the following segments: Oil Sands Mining & Upgrading, Midstream & Refining, and Exploration & Production. The Oil Sands Mining & Upgrading segment produces synthetic crude oil through bitumen mining and upgrading operations. The Midstream & Refining segment focuses on maintaining pipeline operations and investment. The Exploration & Production segment consists of operations in North America, largely in Western Canada, the United Kingdom portion of the North Sea, and Côte d’Ivoire and South Africa in Africa. The company was founded on November 7, 1973 and is headquartered in Calgary, Canada.

About SM Energy

(Get Rating)

SM Energy Co. is an independent energy company, which engages in the acquisition, exploration, development, and production of oil, gas, and natural gas liquids. The company was founded in 1908 and is headquartered in Denver, CO.