OGE Energy Corp.
) reported solid first quarter 2014 results. The company's
earnings per share of 25 cents surpassed the Zacks Consensus
Estimate by a penny and also improved a significant 108.3% from
the year-ago profit of 12 cents per share.
The upswing in the bottom line reflects sizable returns from the
company's two businesses - Oklahoma Gas and Electric Company
(OG&E), a regulated electric utility and Enable Midstream
Partners, LP, having natural gas midstream operations.
Notably, in mid April, the company completed its initial public
offering of Enable Midstream Partners LP common units. This
Oklahoma City-based partnership was formed out of the assets of
OGE Energy Corp.'s Enogex unit and the pipelines of
CenterPoint Energy Inc.
). The units trade on the New York Stock Exchange under the
ticker symbol "ENBL".
CenterPoint has a majority stake of 54.7% while OGE Energy holds
a 26.7% interest in Enable units. Affiliates of ArcLight Capital
Partners currently own 12.4% of the midstream partnership,
although that percentage could drop to 11.5% if underwriters opt
to exercise their purchase option.
OGE Energy's operating revenues in the fourth quarter jumped 23%
year over year to $560.4 million. Also, the reported figure was
ahead of the Zacks Consensus Estimate of $472.0 million.
Total megawatt-hour (MWH) sales in the reported quarter were 7.2
MWH versus 6.5 MWH in the prior-year quarter. This upside
resulted from higher residential and commercial sales.
Total operating expenses in the quarter under review decreased
24.8% year over year to $205.2 million. Operating income of $61.8
million declined 18.0% year over year.
Interest expense of $35.9 million declined 12.9% year over year.
The company's gross profit of $267.0 million surged 10.1% year
over year during the quarter, backed by the increase in wholesale
transmission revenues and customer growth. Moreover weather
played a crucial role as heating degree days were 15% higher than
OG&E, the regulated utility, contributed earnings of 10 cents
per share in the quarter, up 42.9% from 7 cents per share in the
The company's Federal Energy Regulatory Commission/FERC
transmission projects continued to drive utility earnings growth.
It has already completed two transmission lines with a capital
investment totaling about $280 million under a well-managed
OGE Energy's interest in natural gas midstream operations
contributed after-tax equity earnings of 15 cents per share
compared with 6 cents per share in 2013. The improvement reflects
the accretive effect of the Enable transaction along with
favorable commodity prices and higher natural gas and natural gas
OGE Energy maintained its consolidated earnings guidance for 2014
in the range of $1.94 to $2.06 per average diluted share.
Public Service Enterprise Group Inc.
) reported first quarter 2014 earnings of $1.01 per share,
beating the Zacks Consensus Estimate of 97 cents by 4.1%.
Earnings were up 18.82% year over year. The results reflect the
investments made by the company in its stable rate regulated
) reported first-quarter 2014 earnings of $2.29 per share,
beating the Zacks Consensus Estimate by 8.5%.
OGE Energy once again beat our earnings expectation. We expect
the buoyant economy in Oklahoma to bring in more customers. In
addition, OGE Energy's aggressive investments in alternative
energy will spur its future growth momentum given the current
pro-environment drive in the U.S.
The company will capitalize on its midstream capabilities given
robust gas production in Oklahoma and the Texas Panhandle region.
OGE Energy plans to pursue more transmission opportunities as it
has already demonstrated a successful track record of building
high-voltage transmission lines both on time and budget. The
company expects $115 million of gross profit from its
transmission investments in 2014, up $34 million over 2013.
Presently, OGE Energy holds a short-term Zacks Rank #2 (Buy).
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