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Why Southern Company's (SO) Q4 Earnings is Likely to Beat
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The Southern Company (SO - Free Report) is set to release fourth-quarter 2020 results before the opening bell on Thursday, Feb 18. The current Zacks Consensus Estimate for the to-be-reported quarter is 43 cents per share on revenues of $5.1 billion.
Let’s delve into the factors that might have influenced the power supplier’s performance in the December quarter. But it’s worth taking a look at Southern Company’s previous-quarter performance first.
Highlights of Q3 Earnings & Surprise History
In the last-reported quarter, the Atlanta, GA-based service provider missed the consensus mark due to lower electricity demand as the novel coronavirus outbreak reduced industrial and commercial usage. Southern Company had reported earnings per share (excluding certain one-time items) of $1.22 that fell short of the Zacks Consensus Estimate of $1.24. Moreover, the utility’s quarterly revenues of $5.6 billion had missed the Zacks Consensus Estimate of $5.9 billion.
As far as earnings surprises are concerned, Southern Company beat the Zacks Consensus Estimate in three of the last four quarters and missed in the other, delivering an earnings surprise of 7.19%, on average. This is depicted in the graph below:
The Zacks Consensus Estimate for the fourth-quarter bottom line remained the same in the last seven days. However, the estimated figure indicates a 59.3% improvement year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 3.2% increase from the year-ago period.
Factors to Consider This Quarter
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 increased its customer count by 1.4% year over year for the period ending September 2020. This trend most likely continued in the fourth quarter of 2020 because of healthy population growth across its electric and gas franchises.
Meanwhile, the power supplier’s total operating cost in the third quarter decreased 4.9% year over year to $3.8 billion. The downward cost trajectory is likely to have continued in the fourth quarter due to Southern Company’s aggressive expense-management initiatives.
The outbreak of the novel coronavirus has reduced industrial and commercial electricity demand. In particular, with approximately a third of the Southern Company’s total retail sales coming from industrial customers, a sluggish consumption pattern severely affects the fortunes of the firm as compared to the other utilities that are less dependent on the industrial component. However, this is likely to have been offset by higher residential demand. With the coronavirus containment measures forcing people to stay indoors and work from home, usage from the residential class is likely to have strengthened in the fourth quarter.
Why a Likely Positive Surprise?
Our proven model predicts an earnings beat for Southern Company this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Southern Company has an Earnings ESP of +2.03% and a Zacks Rank #3.
Other Stocks to Consider
Southern Company is not the only utility looking up this earnings cycle. Here are some other firms from the space that you may want to consider on the basis of our model:
CenterPoint Energy, Inc. (CNP - Free Report) has an Earnings ESP of +11.11% and a Zacks Rank #3. The firm is scheduled to release earnings on Feb 25.
ONE Gas, Inc. (OGS - Free Report) has an Earnings ESP of +2.36% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb17.
Sempra Energy (SRE - Free Report) has an Earnings ESP of +1.08% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb 25.
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Why Southern Company's (SO) Q4 Earnings is Likely to Beat
The Southern Company (SO - Free Report) is set to release fourth-quarter 2020 results before the opening bell on Thursday, Feb 18. The current Zacks Consensus Estimate for the to-be-reported quarter is 43 cents per share on revenues of $5.1 billion.
Let’s delve into the factors that might have influenced the power supplier’s performance in the December quarter. But it’s worth taking a look at Southern Company’s previous-quarter performance first.
Highlights of Q3 Earnings & Surprise History
In the last-reported quarter, the Atlanta, GA-based service provider missed the consensus mark due to lower electricity demand as the novel coronavirus outbreak reduced industrial and commercial usage. Southern Company had reported earnings per share (excluding certain one-time items) of $1.22 that fell short of the Zacks Consensus Estimate of $1.24. Moreover, the utility’s quarterly revenues of $5.6 billion had missed the Zacks Consensus Estimate of $5.9 billion.
As far as earnings surprises are concerned, Southern Company beat the Zacks Consensus Estimate in three of the last four quarters and missed in the other, delivering an earnings surprise of 7.19%, 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
Trend in Estimate Revision
The Zacks Consensus Estimate for the fourth-quarter bottom line remained the same in the last seven days. However, the estimated figure indicates a 59.3% improvement year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests a 3.2% increase from the year-ago period.
Factors to Consider This Quarter
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 increased its customer count by 1.4% year over year for the period ending September 2020. This trend most likely continued in the fourth quarter of 2020 because of healthy population growth across its electric and gas franchises.
Meanwhile, the power supplier’s total operating cost in the third quarter decreased 4.9% year over year to $3.8 billion. The downward cost trajectory is likely to have continued in the fourth quarter due to Southern Company’s aggressive expense-management initiatives.
The outbreak of the novel coronavirus has reduced industrial and commercial electricity demand. In particular, with approximately a third of the Southern Company’s total retail sales coming from industrial customers, a sluggish consumption pattern severely affects the fortunes of the firm as compared to the other utilities that are less dependent on the industrial component. However, this is likely to have been offset by higher residential demand. With the coronavirus containment measures forcing people to stay indoors and work from home, usage from the residential class is likely to have strengthened in the fourth quarter.
Why a Likely Positive Surprise?
Our proven model predicts an earnings beat for Southern Company this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Southern Company has an Earnings ESP of +2.03% and a Zacks Rank #3.
Other Stocks to Consider
Southern Company is not the only utility looking up this earnings cycle. Here are some other firms from the space that you may want to consider on the basis of our model:
CenterPoint Energy, Inc. (CNP - Free Report) has an Earnings ESP of +11.11% and a Zacks Rank #3. The firm is scheduled to release earnings on Feb 25.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ONE Gas, Inc. (OGS - Free Report) has an Earnings ESP of +2.36% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb17.
Sempra Energy (SRE - Free Report) has an Earnings ESP of +1.08% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Feb 25.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>