NEW YORK (TheStreet) -- Shares of OGE Energy Corp. (OGE) are down 0.44% to $34.17 after Jefferies downgraded the Oklahoma-based company to "hold" from "buy" and lowered its price target to $35.50 from $42.
"We are downgrading OGE to 'hold' from 'buy' based on lower expected liquids pricing and the corresponding reduction in ENBL's DCF," analysts said.
"Due to the contraction of MLP DCF multiples, 2017 GP multiples have gone from 22x to 13x and LP multiples have declined to 11.2x from 17x, we believe OGE is fair value at current levels," analysts noted.
"We now believe OGE's share of Enable Midstream Partners (ENBL) is worth $8.50 (50 cents for GP and $8 for LP) and its regulated utility worth $25.25 plus $1.75 worth of cash," analysts added.
Separately, TheStreet Ratings team rates OGE ENERGY CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate OGE ENERGY CORP (OGE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 4.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- 42.37% is the gross profit margin for OGE ENERGY CORP which we consider to be strong. Regardless of OGE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OGE's net profit margin of 24.81% significantly outperformed against the industry.
- Net operating cash flow has slightly increased to $284.70 million or 4.93% when compared to the same quarter last year. Despite an increase in cash flow, OGE ENERGY CORP's cash flow growth rate is still lower than the industry average growth rate of 19.74%.
- The debt-to-equity ratio is somewhat low, currently at 0.90, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.28 is very weak and demonstrates a lack of ability to pay short-term obligations.
- OGE ENERGY CORP's earnings per share declined by 13.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OGE ENERGY CORP increased its bottom line by earning $1.95 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($1.97 versus $1.95).
- You can view the full analysis from the report here: OGE Ratings Report