OGE Energy Corp. (OGE) reported third-quarter earnings of 94 cents per share, in line with the Zacks Consensus Estimate. Reported earnings, however, were lower than the previous-year figure of $1.08 by 13%. The year-over-year decline was primarily due to a cooler summer during the quarter.
Total Revenue
OGE Energy’s operating revenues of $754.7 million in the third quarter of 2014 was ahead of the Zacks Consensus Estimate by 1.2%. Operating revenue also increased from the prior-year figure of $723.2 million by 4.4%. The year-over-year increase was primarily due to higher operating revenue generated from the Electric Utility.
Operational Highlights
Total sales in the reported quarter were 8.6 million megawatt-hour (MWH) versus 8.3 million MWH in the prior-year quarter. The upside resulted from higher off-system sales. The company’s customer count increased by roughly 1% in the reported quarter as compared to the prior-year quarter.
Cost of sales in the reported quarter was $305.3 million, up 11.8% year over year. The rise in cost of sales was due to higher cost of sales of the Electric Utility.
Total operating expenses in the quarter under review increased 6.3% year over year to $201.3 million. Operating expenses increased on account of higher operation and maintenance, and depreciation and amortization expenses. Operating income declined 4.9% to $248.1 million from the year-ago figure of $260.9 million.
Interest expenses were $37.2 million in the reported quarter, up 10.4% year over year.
Other Highlights of the Release
OGE Energy reported net income of $187 million in the third quarter, down 13% from the prior-year figure of $215 million.
OG&E reported net income of $157 million in the third quarter, down 8.7% from $172 million in the year-ago quarter. The decline mainly resulted from higher operating and interest expenses, and a milder weather, and was partially offset by higher revenues resulting from new customer additions.
Natural Gas Midstream Operations’ net income of $28 million in the reported quarter was lower than the prior-year figure of $46 million.
Guidance
OGE Energy expects its consolidated earnings for 2014 to be at the low end of the previously estimated range of $1.94 to $2.06 per average diluted share.
OG&E, the regulated utility, is expected to earn lower than the previous guidance of $1.46 to $1.52 per share in 2014 primarily due to lower revenues on account of a milder summer.
OGE Energy’s 2014 earnings guidance assumes normal weather for the remaining year and the dilution associated with the initial public offering of Enable Midstream Partners (ENBL).
Other Peer Releases
PG&E Corp’s (PCG) adjusted operating earnings of $1.73 per share in the third quarter of 2014 comfortably surpassed the Zacks Consensus Estimate of $1.15 by 50.4%.
Edison International (EIX) reported solid third-quarter 2014 results wherein its adjusted earnings of $1.52 per share came ahead of the Zacks Consensus Estimate of $1.35 by 12.6%.
Our Take
OGE Energy’s results were in line with our expectations but the mild summer played havoc and resulted in a sharp year-over-year decline in its earnings. However, total sales increased 3.6% in the reported quarter. The company also benefitted substantially from the addition of more than 8000 customers.
OGE Energy currently has a Zacks Rank #3 (Hold).
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