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OGE Energy (OGE) to Gain From Investments & Solid Cash Flow

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We have recently issued an updated research report on OGE Energy Corp. (OGE - Free Report) . The company’s third-quarter 2018 earnings of $1.02 per share surpassed the Zacks Consensus Estimate by 6.25%.

The company’s operating revenues of $698.8 million declined 2.5% from $716.8 million registered in the prior-year quarter. Total sales in the reported quarter amounted to 8.5 million megawatt-hours (MWh).

Notably, OGE Energy is the largest electric utility in Oklahoma. Its well-positioned regulated utility and unregulated midstream gas businesses carry low risk.

What’s Driving the Stock?

OGE Energy is pursuing an aggressive energy efficiency program. Between 2018 and 2022, it plans to spend around $5 billion, up from the prior five-year investment plan worth $3.3 billion.

Coming to OGE Energy’s third-quarter achievements, the company witnessed 4% improvement in generation reliability at its Mustang Energy Center from 2017. Distribution reliability also improved 10% over 2017. Moreover, the company completed and placed into service the Windspeed II transmission line, the Covington solar farm.

In the quarter under review, OGE Energy’s Enable Midstream Partners recorded growth in per day natural gas gathered volumes for the 11th consecutive quarter. The partnership also witnessed record levels of distributable cash flow and net income. This is because the partnership continues to tie in assets to expand its existing footprint in some of the most prolific oil and gas basis in the United States.

These apart, OGE Energy’s strong balance sheet is commendable. It allows the company to reward its shareholders with dividends. In line with this, OGE Energy raised its dividend by 10% at the end of September 2018.

On the flip side, Moody's Investors Service lowered its rating from A3 to Baa1 for the company in July 2018. The Oklahoma regulatory environment and the 2017 Tax Act were both cited by Moody's Investors Service as contributing factors to the rating downgrade. Such lower ratings might lead to higher financing costs for OGE Energy.

Zacks Rank and Key Picks

OGE Energy currently carries a Zacks Rank #2 (Buy). A few top-ranked stocks in the same space are Ameren Corporation (AEE - Free Report) , Entergy Corporation (ETR - Free Report) and CMS Energy Corporation (CMS - Free Report) , each carrying the same rank as OGE Energy. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameren delivered an average positive earnings surprise of 15.40% in the last four quarters. The Zacks Consensus Estimate for current-year earnings has been revised 5% upward to $3.37 over the past 90 days.

Entergy Corporation delivered an average earnings surprise of 36.20% over the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has climbed 11.3% to $6.98 over the past 90 days.

CMS Energy delivered an average beat of 6.37% in the preceding four quarters. The Zacks Consensus Estimate for the current-year bottom line has remained unchanged over the past 90 days.

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