DTB - OGE Energy: Interest Expenses Dragging On Results But Valuation Has Improved

2024-07-02 16:36:28 ET

Summary

• OGE Energy Corp. primarily serves Oklahoma and western Arkansas, with a customer base of approximately 900,000, benefiting from population growth due to remote work trends.
• The stock price has appreciated by 5.49% since October 2023 but underperformed the S&P 500 Index, offering a forward dividend yield of 4.73%.
• The company's customer base and electricity consumption are growing, with revenue increasing by 7.11% year-over-year, but net income growth is impacted by rising interest expenses.
• The company has no debt maturities until 2027 so it will probably not have to roll over debt at today's high rates. This is a beneficial situation.
• The stock's valuation has improved significantly since October due to higher expected growth. However, it still looks pricey compared to its peers.

OGE Energy Corp. ( OGE ) is an electric utility that primarily serves the state of Oklahoma. The company also has a small service territory in western Arkansas, along the Oklahoma border:

This is one of the most rural areas of the United States, and as such the company’s customer base is not particularly large despite the fact that its service territory covers an enormous geographic area. In the first quarter 2024 earnings press release , OGE Energy stated that it had approximately 900,000 customers. An investor fact sheet that the company released in November of 2022 puts its customer count at 887,000 so it appears that the company has been gaining customers over the past few years. This is unsurprising as Oklahoma has been one of the states that has been benefiting from the remote work trend and is experiencing a net inflow of people trying to get away from the big cities. It also provides a bit of a bullish tailwind for this company. After all, people who move into the company’s service territory will almost certainly end up becoming customers of the company since few people want to live in a house without reliable electricity....

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