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What Lies Ahead for Southern Company (SO) in Q1 Earnings?
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Electric utility firm Southern Company (SO - Free Report) is set to release its first-quarter 2018 results before the opening bell on Wednesday, May 2. The current Zacks Consensus Estimate for the quarter under review is a profit of 82 cents on revenues of $5,700 million.
In the preceding three-month period, the Atlanta, GA-based service provider reported stronger-than-expected earnings due to strength of its retail unit and lower operations and maintenance costs.
As far as earnings surprises are concerned, the utility is on a firm footing, having gone past the Zacks Consensus Estimate in each of the last four reports. This is depicted in the graph below:
Investors are keeping their fingers crossed and hoping that Southern Company surpasses earnings estimate this time too. Let’s delve deeper and find out the factors impacting the results.
Factors to Consider This Quarter
A leading utility holding entity in the U.S., Southern Company dominates the power business across the Southeast. With a strong rate base growth and constructive regulation, we expect the firm to generate steady earnings.
Also, with operations in a stable and growing industry, Southern Company has a steady stream of cash flow. The utility’s history of consistent dividend payments indicates its confidence in itself.
We further believe that the AGL Resources acquisition will be accretive to Southern Company earnings.
However, with customer growth tepid and likely to remain so for some time, sales might be affected. This together with a large base, might make it difficult for Southern Company to manage rates. Higher operating and maintenance expenses is another concern.
The utility is also bearing the brunt of continued delays and cost overruns over two of its large construction projects — Vogtle and Kemper — which are again expected to weigh on Southern Company's fortunes.
Earnings Whispers
Our proven model does not conclusively show that Southern Company will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, for Southern Company stands at -0.40%.
Zacks Rank: Southern Company’s Zacks Rank #4 (Sell) further decreases the predictive power of ESP, making us less confident of an earnings surprise call.
As it is, we caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for Southern Company, here are some utilities you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
WEC Energy Group, Inc. (WEC - Free Report) has an Earnings ESP of +0.58% and a Zacks Rank #2. The utility is likely to release earnings on May 1.
Hawaiian Electric Industries, Inc. (HE - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #2. The utility is likely to release earnings on May 4.
Looking for Stocks with Skyrocketing Upside?
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What Lies Ahead for Southern Company (SO) in Q1 Earnings?
Electric utility firm Southern Company (SO - Free Report) is set to release its first-quarter 2018 results before the opening bell on Wednesday, May 2. The current Zacks Consensus Estimate for the quarter under review is a profit of 82 cents on revenues of $5,700 million.
In the preceding three-month period, the Atlanta, GA-based service provider reported stronger-than-expected earnings due to strength of its retail unit and lower operations and maintenance costs.
As far as earnings surprises are concerned, the utility is on a firm footing, having gone past the Zacks Consensus Estimate in each of the last four reports. This is depicted in the graph below:
Southern Company (The) Price and EPS Surprise
Southern Company (The) Price and EPS Surprise | Southern Company (The) Quote
Investors are keeping their fingers crossed and hoping that Southern Company surpasses earnings estimate this time too. Let’s delve deeper and find out the factors impacting the results.
Factors to Consider This Quarter
A leading utility holding entity in the U.S., Southern Company dominates the power business across the Southeast. With a strong rate base growth and constructive regulation, we expect the firm to generate steady earnings.
Also, with operations in a stable and growing industry, Southern Company has a steady stream of cash flow. The utility’s history of consistent dividend payments indicates its confidence in itself.
We further believe that the AGL Resources acquisition will be accretive to Southern Company earnings.
However, with customer growth tepid and likely to remain so for some time, sales might be affected. This together with a large base, might make it difficult for Southern Company to manage rates. Higher operating and maintenance expenses is another concern.
The utility is also bearing the brunt of continued delays and cost overruns over two of its large construction projects — Vogtle and Kemper — which are again expected to weigh on Southern Company's fortunes.
Earnings Whispers
Our proven model does not conclusively show that Southern Company will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, for Southern Company stands at -0.40%.
Zacks Rank: Southern Company’s Zacks Rank #4 (Sell) further decreases the predictive power of ESP, making us less confident of an earnings surprise call.
As it is, we caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for Southern Company, here are some utilities you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
South Jersey Industries, Inc. has an Earnings ESP of +3.47% and a Zacks Rank #1. The firm is anticipated to release earnings on May 8. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
WEC Energy Group, Inc. (WEC - Free Report) has an Earnings ESP of +0.58% and a Zacks Rank #2. The utility is likely to release earnings on May 1.
Hawaiian Electric Industries, Inc. (HE - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #2. The utility is likely to release earnings on May 4.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>