On Oct 13, we have issued an updated research report on OGE Energy Corp. (OGE). Strategic investments in expansion of utility systems and stable growth in the customer count will likely boost the company’s future performance. OGE Energy’s steady focus on paying dividends at regular intervals and reducing pollution emission during power generation are appreciable. However, stringent government regulations, operational risks at the company’s transmission and distribution operations, and volatile commodity prices might deter growth.
In the second quarter of 2014, this Zacks Rank #3 (Hold) stock’s earnings missed the Zacks Consensus Estimate while revenues surpassed the same. Quarterly earnings increased year over year primarily on the heels of higher contribution from the natural gas midstream operations. The reported top line decreased from the year-ago level mainly due to lower system sales revenues.
OGE Energy continues to expand its base transmission, distribution and generation operations. During the first half of 2014, the company invested $294.1 million and plans to invest a total of $585 million in 2014. The company currently plans to install a 77-mile transmission line from its Woodward District Extra High Voltage substation and commence numerous integrated transmission ventures. These projects will allow OGE Energy to provide reliable services to its customers.
The company is witnessing a steady rise in its customer count, primarily due to the recovering Oklahoma economy and the decreasing unemployment rate in the state. Steady investments in several projects will enable the company to meet increasing customer demand.
In addition, OGE Energy is keen on maximizing shareholder wealth through regular and incremental dividend payment. In Sep 2014, the company increased its quarterly dividend rate by 11.1% to 25 cents from the previous payout.
On the downside, we are concerned about stringent government regulations. Any change in rules and inability to comply with the laws could impact OGE Energy’s profitability adversely.
Key Picks from the Sector
Other better-ranked stocks in the utility sector include American Electric Power Co., Inc. (AEP), Ameren Corporation (AEE) and Consolidated Edison, Inc. (ED), each carrying a Zacks Rank #2 (Buy).
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