We have maintained our Neutral recommendation on
OGE Energy Corp.
) on Sep 4, 2013 based on a strong Oklahoma economy and ongoing
infrastructure improvement programs. However, these positives are
partly tempered by instability at the commodity business and the
Why the Reiteration?
OGE Energy is the largest electric utility in Oklahoma, and its
well-positioned regulated utility and unregulated midstream gas
businesses carry low risk.
The company is pursuing an aggressive energy efficiency program,
investing in renewable energy technologies and upgrading its
infrastructure. The company is focused on developing renewable
energy projects and upgrading its distribution system. Recent
investments have positioned the company well to comply with
environmental regulations and to meet its long-term earnings per
share growth target of 5%-7%. Moreover, the recently formed
midstream master limited partnership would help the company in
achieving better results.
OGE Energy operates in Oklahoma, where unemployment is
significantly lower than the national average. The resilience in
the economy of its service area bodes well for the company. Also,
its midstream assets are strategically located to benefit from
strong gas production growth in Oklahoma and the Texas panhandle.
Looking forward, lower-than-average electricity rates provide the
company with significant scope for growth.
Despite these positives, weak second quarter results, volatility
in its commodity business, pending regulatory cases, costs for
the Oklahoma tornado restorations and the unfavorable macro
backdrop keep us concerned.
Other Stocks to Consider
OGE Energy presently retains a Zacks Rank #3 (Hold). However,
stocks that are worth considering in the space are
Huaneng Power International, Inc.
Integrys Energy Group, Inc.
), all with a Zacks Rank #2 (Buy).
HUANENG POWER (HNP): Free Stock Analysis
IDACORP INC (IDA): Free Stock Analysis Report
OGE ENERGY CORP (OGE): Free Stock Analysis
INTEGRYS ENERGY (TEG): Free Stock Analysis
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