On Tuesday, Evercore ISI analyst Durgesh Chopra raised the rating on OGE Energy (NYSE:OGE) stock from In Line to Outperform, setting a new price target of $47.00, up from the previous $40.00.
The $8.55 billion utility company, which maintains a "GOOD" financial health score according to InvestingPro, has shown strong fundamental performance. Chopra highlighted the company's projected 7% earnings per share (EPS) growth through 2027, which aligns with the higher end of their targeted 5-7% range.
This growth expectation is supported by OGE Energy's robust financial position, underscored by its Moody's (NYSE:MCO) Baa1 rating, a notch above the Baa2 rating common among its peers in the regulated utility sector. The company's financial strength is further evidenced by its impressive 55-year streak of maintaining dividend payments, with 18 consecutive years of dividend increases. Currently offering a 3.96% dividend yield, OGE Energy stands out in the utility sector for its reliable shareholder returns.
The analyst emphasized OGE Energy's advantage due to its strong balance sheet, noting that there is no planned equity issuance within the current five-year plan. This financial stability, according to Chopra, warrants a higher premium than the current 9%. Additionally, the anticipation of a significant customer load deal could further spur earnings growth for the utility company.
Evercore ISI sees a favorable risk/reward scenario for OGE Energy, with a base case total return of 15% driven by the $47 target price. The firm's valuation encompasses a bull case of $48 and a bear case of $37, suggesting a potential upside of 17% compared to a downside of 9%. These estimates are based on modeling approximately 7% EPS growth and applying around a 12% premium to their target 16x multiple to arrive at the $47 price target.
The analyst's 2025 earnings estimate of $2.25 per share exceeds the company's original 2024 guidance by 6% and is slightly below the consensus estimate of $2.27. Trading at a P/E ratio of 22.03x, InvestingPro analysis suggests the stock is currently overvalued relative to its Fair Value.
OGE Energy is scheduled to release its Q4 earnings on February 20, 2025, where it will provide 2025 EPS guidance and update its five-year capital and financing plan. For deeper insights into OGE Energy's valuation and financial metrics, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 US stocks with detailed analysis and actionable intelligence.
In other recent news, OGE Energy Corp. has made significant strides in its financial performance and corporate structure. The company recently named Charles Walworth as its new Chief Financial Officer and Treasurer, a role he is stepping into after a 25-year tenure at the company. Additionally, OGE Energy's Board of Directors declared a quarterly dividend of $0.42125 per common share.
OGE Energy reported strong Q3 2024 results with consolidated earnings of $1.09 per share, despite a decrease in net income due to higher expenses. The company's management is confident about meeting the upper end of its earnings guidance for the year, which ranges from $2.06 to $2.18 per share. This optimism is supported by a significant year-to-date load growth of 6.8%, with a forecast of 4% to 6% for the full year.
The company has over $200 million in potential SPP ITP projects in the pipeline, with service expected to start by 2028. In light of increasing load growth projections, OGE Energy is reevaluating its capital expenditure expectations. The company aims for a consistent yearly consolidated EPS growth of 5% to 7% beyond 2024.
A regulatory order in the Oklahoma rate review is expected by the end of the year. OGE Energy continues to focus on maintaining a sustainable business model with low rates and effective capital investments. The company is committed to ensuring that large load customers do not negatively impact residential rates, demonstrating its dedication to fair cost allocations.
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