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OGE Energy Corporation (OGE - Analyst Report), the largest electric utility in Oklahoma – remains on our Neutral list with a target price of $61.00. Moreover, the company has a Zacks Rank #4 (Sell).

Why Reiterate?

We remain impressed by the company’s robust quarterly earnings and impressive full year 2013 outlook; however, its continued weak sales performances year over year make us cautious.

The fourth quarter 2012 earnings of 39 cents per share at OGE Energy exhibited an  improvement of over 5.4% from the comparable year-ago quarter as well as the Zacks Consensus Estimate of 34 cents.

The upside was attributable to higher gross margins at Oklahoma Gas and Electric Company (OG&E) due to increased transmission revenue, recovery of various utility investments and new customer growth. This was partially offset by higher operating expenses.

Looking at the earnings surprise history, the company has steadily beaten the Zacks Consensus Estimates in the past four quarters. The average positive surprise in the trailing four quarters comes to 7.5%.

Looking ahead, the company expects its full year 2013 earnings in the range of $3.35–$3.60 per share. The guidance assumes approximately 100 million average diluted shares outstanding and normal weather for the year. Currently, the Zacks Consensus Estimate stands at $3.49 per share, which is the mid-point of the company’s guidance range.

Going forward, the company offers stable regulated utility businesses, operates in a strong Oklahoma economy, has a bias towards fixed fee in its unregulated natural gas business, offers a high dividend yield and employs ongoing infrastructure improvement programs.

All of the above positives have already been priced in the current valuation, leaving little room for further upside in the near term. Also, we remain concerned about the volatility in its commodity business and pending regulatory cases, along with the unfavorable macro backdrop.

Other Stocks Worth Considering

Other stocks worth considering in the utility industry are Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report), Huaneng Power International, Inc. (HNP - Snapshot Report) and Pike Electric Corporation (PIKE - Snapshot Report). These stocks sporting a Zacks Rank #1 (Strong Buy) have the potential to rise significantly from current levels.

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