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OGE Energy Misses Q2 Earnings Estimates, Maintains Guidance

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OGE Energy Corp.’s  (OGE - Free Report) second quarter earnings of 50 cents per share missed the Zacks Consensus Estimate by 3.8%  but improved 8.7% from the year-ago earnings of 46 cents per share.

The year-over-year improvement was primarily due to robust contribution from the natural gas midstream operations. The midstream business contributed 12 cents to the reported quarter earnings, up from 7 cents in the year-ago quarter.

Total Revenue

OGE Energy’s operating revenues in the second quarter 2014 decreased 16.7% year over year to $611.8 million.  However, the reported figure was ahead of the Zacks Consensus Estimate of $595 million by 2.8%.

Operational Highlights

Total sales in the reported quarter were 7.6 million megawatt-hour (MWH) versus 6.9 million MWH in the prior-year quarter. This upside resulted from higher commercial and off-system sales.

Cost of sales in the reported quarter was $270.9 million, down 26.9% year over year.

Total operating expenses in the quarter under review decreased 9.4% year over year to $199.1 million. Operating income of $141.8 million declined 1.5% year over year.

Interest expense of $39.4 million increased 5.6% year over year.


OGE Energy maintained its consolidated earnings guidance for 2014 in the range of $1.94 to $2.06 per average diluted share.

OG&E, the regulated utility, is expected to earn $1.46 to $1.52 per share in 2014 assuming normal weather. OGE Enogex Holdings is expected to earn 49 cents to 55 cents per share in 2014. The loss at its holding company is expected to be 1 cent.

OGE Energy’s 2014 earnings guidance assumes normal weather for the remainder of the year and the dilution associated with the initial public offering of Enable Midstream Partners. (ENBL - Free Report)  

Other Releases

Public Service Enterprise Group Inc. (PEG - Free Report) reported second quarter 2014 operating earnings of 49 cents per share, below the Zacks Consensus Estimate of 53 cents by 7.5%

Entergy Corporation (ETR - Free Report) posted second quarter 2014 operational earnings of $1.11 per share, lagging the Zacks Consensus Estimate of $1.14 by 2.6%.

Our Take

OGE Energy missed our earnings expectation but the buoyant economy in its service territories helped the company to add more than 9,000 customers from the year-ago period. Weather normalized sales grew 1.5%, in the reported quarter, which is definitely encouraging.

The company has plans to invest nearly $3 billion over the 2014 – 2018 time frame. We believe systematic capital investments will not only strengthen the existing infrastructure of the company but also make its operations more environment friendly.

OGE Energy currently has a Zacks Rank #3 (Hold).

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