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Will Southern (SO) Continue Its Earnings Beat Streak in Q3?
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The Southern Company (SO - Free Report) is set to release third-quarter results on Oct 27. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $1.34 per share on revenues of $6.7 billion.
Let’s delve into the factors that might have influenced the power supplier’s performance in the September quarter. But it’s worth taking a look at Southern Company’s previous-quarter results first.
Highlights of Q2 Earnings & Surprise History
In the last reported quarter, the Atlanta, GA-based service provider beat the consensus mark due to the positive effects of rates, usage and pricing changes, plus a demand boost from warmer-than-normal weather. Southern Company had reported adjusted earnings per share of $1.07, comfortably beating the Zacks Consensus Estimate of 84 cents. Revenues of $7.2 billion had also come in 28.1% above the consensus mark.
SO topped the Zacks Consensus Estimate for earnings in each of the last four quarters. The utility has a trailing four-quarter earnings surprise of 9.4%, on average. This is depicted in the graph below:
Southern Company's seven major regulated utilities serve approximately nine million electric and natural gas customers. Leveraging the demographics of its operating territories, the firm has been successfully expanding its regulated business customer base. As proof of that effort, Southern Company added some 12,000 new residential electric customers and more than 7,000 residential natural gas customers in the second quarter. This trend most likely continued in the July-September period of 2022 because of healthy economic development across its service territories.
In particular, the firm is expected to have benefited from higher retail electricity sales, reflecting economic recovery in the Southeast in the form of demand from industrial buyers. Finally, investment in state-regulated electric/gas franchises and continued trends in hybrid working have most likely buoyed Southern Company’s revenues and cash flows.
On a somewhat bearish note, the power supplier’s total operating cost in the second quarter increased 23.6% year over year to $5.6 billion. The upward cost trajectory is likely to have continued in the second quarter due to inflationary pressures.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Southern Company is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -0.38%.
Zacks Rank: Southern Company currently carries a Zacks Rank #1.
While an earnings beat looks uncertain for Southern Company, here are some firms from the utilities space that you may want to consider on the basis of our model:
FirstEnergy Corp. (FE - Free Report) has an Earnings ESP of +3.45% and a Zacks Rank #2. The firm is scheduled to release earnings on Oct 25.
Over 60 days, FE has seen the Zacks Consensus Estimate for 2022 increase 1.3%. Valued at around $21.1 billion, FirstEnergy has decreased 3.5% in a year.
NextEra Energy, Inc. (NEE - Free Report) has an Earnings ESP of +1.91% and a Zacks Rank #2. The firm is scheduled to release earnings on Oct 28.
NextEra Energy topped the Zacks Consensus Estimate by an average of 5.5% in the trailing four quarters, including an 8% beat in Q2. NEE has lost 16.2% in a year.
American Water Works Company, Inc. (AWK - Free Report) has an Earnings ESP of +2.50% and a Zacks Rank #3. The firm is scheduled to release earnings on Oct 31.
For 2022, American Water Works has a projected earnings growth rate of 4.5%. Valued at around $24.4 billion, MUSA has lost 25.5% in a year.
Image: Bigstock
Will Southern (SO) Continue Its Earnings Beat Streak in Q3?
The Southern Company (SO - Free Report) is set to release third-quarter results on Oct 27. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $1.34 per share on revenues of $6.7 billion.
Let’s delve into the factors that might have influenced the power supplier’s performance in the September quarter. But it’s worth taking a look at Southern Company’s previous-quarter results first.
Highlights of Q2 Earnings & Surprise History
In the last reported quarter, the Atlanta, GA-based service provider beat the consensus mark due to the positive effects of rates, usage and pricing changes, plus a demand boost from warmer-than-normal weather. Southern Company had reported adjusted earnings per share of $1.07, comfortably beating the Zacks Consensus Estimate of 84 cents. Revenues of $7.2 billion had also come in 28.1% above the consensus mark.
SO topped the Zacks Consensus Estimate for earnings in each of the last four quarters. The utility has a trailing four-quarter earnings surprise of 9.4%, on average. This is depicted in the graph below:
Southern Company The Price and EPS Surprise
Southern Company The price-eps-surprise | Southern Company The Quote
Factors to Consider
Southern Company's seven major regulated utilities serve approximately nine million electric and natural gas customers. Leveraging the demographics of its operating territories, the firm has been successfully expanding its regulated business customer base. As proof of that effort, Southern Company added some 12,000 new residential electric customers and more than 7,000 residential natural gas customers in the second quarter. This trend most likely continued in the July-September period of 2022 because of healthy economic development across its service territories.
In particular, the firm is expected to have benefited from higher retail electricity sales, reflecting economic recovery in the Southeast in the form of demand from industrial buyers. Finally, investment in state-regulated electric/gas franchises and continued trends in hybrid working have most likely buoyed Southern Company’s revenues and cash flows.
On a somewhat bearish note, the power supplier’s total operating cost in the second quarter increased 23.6% year over year to $5.6 billion. The upward cost trajectory is likely to have continued in the second quarter due to inflationary pressures.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Southern Company is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -0.38%.
Zacks Rank: Southern Company currently carries a Zacks Rank #1.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
While an earnings beat looks uncertain for Southern Company, here are some firms from the utilities space that you may want to consider on the basis of our model:
FirstEnergy Corp. (FE - Free Report) has an Earnings ESP of +3.45% and a Zacks Rank #2. The firm is scheduled to release earnings on Oct 25.
Over 60 days, FE has seen the Zacks Consensus Estimate for 2022 increase 1.3%. Valued at around $21.1 billion, FirstEnergy has decreased 3.5% in a year.
NextEra Energy, Inc. (NEE - Free Report) has an Earnings ESP of +1.91% and a Zacks Rank #2. The firm is scheduled to release earnings on Oct 28.
NextEra Energy topped the Zacks Consensus Estimate by an average of 5.5% in the trailing four quarters, including an 8% beat in Q2. NEE has lost 16.2% in a year.
American Water Works Company, Inc. (AWK - Free Report) has an Earnings ESP of +2.50% and a Zacks Rank #3. The firm is scheduled to release earnings on Oct 31.
For 2022, American Water Works has a projected earnings growth rate of 4.5%. Valued at around $24.4 billion, MUSA has lost 25.5% in a year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.