Change is a constant in the business world, with some companies playing the role of the disruptor while others are forced to adjust with the times. Brookfield Renewable Partners (BEP 0.41%) is an agent of change today. FedEx (FDX 0.76%) is working hard to shift its business model so it doesn't get left behind. Here's what you need to know to decide which of these two companies is worth a deeper dive.

The disruptor

As its name implies, Brookfield Renewable Partners owns things like solar farms and wind farms, among other clean energy solutions. The core of the limited partnership's portfolio is built around hydropower facilities, which is among the oldest and most reliable clean energy sources. Harnessing water accounts for roughly 75% of the power it generates. On that base it is expanding into newer areas. 

Two hands holding wooden blocks spelling the words risk and reward

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So while Brookfield Renewable is definitely a disruptor in the energy sector, it isn't taking on huge risks in the space. It is, however, helping to push the industry forward throughout the rest of its power generation. For example, when SunEdison went bankrupt, Brookfield Renewable was able to step up in 2017 and buy TerraForm Global and a controlling stake in TerraForm Power. This pair of moves materially increased its exposure to wind (21% of power generation) and solar (4%), and further expanded its reach globally (40% of its generation resides outside of North America). It was only possible because of the strong hydro foundation, which, in the end, allowed these two entities to continue to support newer forms of renewable power. 

Today, Brookfield Renewable is one of the largest renewable power companies in the world. And it is performing quite well, with a 14% year-over-year increase in funds from operations (FFO) in 2018 built on the TerraForm acquisitions and others it has made along the way. That strength continued into the first quarter, with FFO up roughly 18%. While large acquisitions have been big news recently, the TerraForm arrangements built a strong platform for ground-up construction and smaller bolt-on deals. Although it's impossible to predict acquisition flow, there are currently four construction projects in the works across hydro, solar, wind, and storage that will come on line between 2019 and 2021 and should add $13 million to FFO on an annualized basis. Longer-term, Brookfield Renewable has projects on the drawing board that could add another $50 million to FFO.   

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So the growth outlook looks strong for Brookfield Renewable as it helps to disrupt the energy sector. And, while it's doing that, it is also focused on rewarding investors with distributions. The current yield is nearly 6%, with an FFO payout ratio of around 75% in the first quarter of 2019. The company is looking to get that number down to 70% over time even as it hopes to provide investors with distribution increases of between 5% and 9% a year. At this point, it has increased its distribution for 10 consecutive years averaging toward the low end of that range. All told, Brookfield Renewable is a strong option if you are looking for a way to play the changing shape of the power sector. 

The disrupted

FedEx, which is one of the world's largest shipping companies (best known for pioneering overnight delivery), is on the other end of the spectrum: Its business is increasingly under strain. There are two high-profile pieces to the puzzle here. First, the rapid growth of online shopping has led to service shortfalls because FedEx's system hasn't been robust enough to handle peak demand around the holiday season. Second, it is now facing increasing competition, notably from Amazon's effort to build out its own distribution system. That has pushed online competitors to follow along and offer quick, and often free, delivery pledges that have put pressure on the rates that FedEx and its peers can charge.

The end result hasn't been particularly good for FedEx, where weak financial performance has led to a massive stock price decline. There are a number of factors driving this, including some that have been self-inflicted, like the acquisition of TNT Express in 2016, and others it can't control, like global trade frictions that have hampered demand. But the remaining issues are both related to the online space: the need to boost spending to upgrade its systems to handle peak demand and margin pressures driven by online competition.

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The company has repeatedly lowered its guidance and reported earnings in fiscal 2019 that were anything but impressive. Although revenue grew nearly 3%, adjusted margin declined 1.1 percentage points and adjusted earnings were lower by a painful 15%. To be fair, FedEx isn't sitting still, but so far adapting to the changing market it serves hasn't been going particularly well. And the transition isn't over yet, with management's outlook for fiscal 2020 best summed up as weak. 

That said, long-term debt is roughly 50% of FedEx's capital structure, a reasonable figure for a company that has to support a large distribution network of facilities, trucks, and planes, among other things. And while earnings have been weak, the company is still generating a material amount of cash. Yes, most of the money is being put toward system upgrades today, but once that spending is done, FedEx's business should look much stronger. 

Of course that assumes it can successfully adjust. While that remains to be seen, it is notable that FedEx recently decided to stop working with Amazon. Although that sounds like it would be a big deal, Amazon accounts for less than 2% of FedEx's revenue. In other words, FedEx has a very large business with or without the e-commerce titan. And that suggests that the hype around Amazon is probably overblown; there's a big delivery world out there and FedEx intends to remain a major player. That has some people thinking that the risks involved with the delivery giant don't necessarily justify selling out immediately.

Probably best to play it safe

Yet even given the possibility that FedEx might be able to turn things around, most investors would probably be better off with Brookfield Renewable Partners today. The energy industry disruptor is operating from a position of strength and building off of a strong foundation. Add in the fat yield and distribution growth plans, and the partnership looks even more enticing. FedEx requires a bit more faith. Essentially it is an entrenched company muddling through material changes in the shipping industry. It is on solid financial ground, but there's still more work to be done. Only more aggressive investors should be considering FedEx, but after such a bruising stock decline, there could be material upside if it succeeds in adapting to the times.