OGE Energy's Favorable Outcome Has Played Out, Goldman Sachs Says

With OGE Energy Corp OGE shares up about 13 percent since Goldman Sachs added the stock to its Buy list in January, the firm believes its thesis has played out and a favorable outcome for the stock is priced in at the current valuation.

The Analyst

Goldman Sachs analyst Michael Lapides downgraded OGE from Buy to Neutral.

The Thesis

Goldman Sachs’ initial bullish thesis was based on higher EPS estimates, improved regulatory quality and a free cash flow inflection, analysts led by Lapides said in a note.

Lapides also said the potential for a rate case settlement – another core drive of the firm’s January upgrade - in Oklahoma could indicate a “more constructive” regulatory environment.

Now, the firm’s thesis appears to have played out and is reflected in current valuation, said Lapides.

“We view the favorable outcome as already priced in as we believe that the current valuation already gives some credit for an improved regulatory quality in OK," the note said.

Price Action

At time of publication, OGE shares were trading up less than 1 percent at $35.20.

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