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Will Southern (SO) Continue Its Earnings Beat Streak in Q2?

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The Southern Company (SO - Free Report) is set to release second-quarter results on Jul 28. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 86 cents per share on revenues of $5.6 billion.

Let’s delve into the factors that might have influenced the power supplier’s performance in the June quarter. But it’s worth taking a look at Southern Company’s previous-quarter results first.

Highlights of Q1 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. Southern Company had reported adjusted earnings per share of 97 cents, comfortably beating the Zacks Consensus Estimate of 91 cents. Revenues of $6.6 billion generated by the firm had also come in 11.7% above the consensus mark.

SO topped the Zacks Consensus Estimate by an average of 4.2% in the trailing four quarters. This is depicted in the graph below:
 

Southern Company The Price and EPS Surprise

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 second-quarter bottom line has remained the same in the past seven days. The estimated figure indicates a 2.4% rise year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests an 8.2% increase from the year-ago period.

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 11,000 new residential electric customers and 7,000 residential natural gas customers in the first quarter. This trend most likely continued in the April-June 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 first quarter increased 22.1% year over year to $5.3 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 predict that Southern Energy is likely to beat second-quarter estimates. 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 -5.81%.

Zacks Rank: SO currently carries a Zacks Rank #3.

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:

DTE Energy (DTE - Free Report) has an Earnings ESP of +5.17% and a Zacks Rank #2. The firm is scheduled to release earnings on Jul 28.

For 2022, DTE has a projected earnings growth rate of 0.3%. Valued at around $23.5 billion, DTE Energy has increased around 5.8% in a year.

You can see the complete list of today’s Zacks #1 Rank stocks here.

American Water Works Company, Inc. (AWK - Free Report) has an Earnings ESP of +1.46% and a Zacks Rank #3. The firm is scheduled to release earnings on Jul 27.

AWK is valued at around $26.3 billion. The utility topped the Zacks Consensus Estimate by an average of 5.3% in the trailing four quarters. American Water Works has lost around 11.2% in a year.

American Electric Power (AEP - Free Report) has an Earnings ESP of +6.77% and a Zacks Rank #3. The firm is scheduled to release earnings on Jul 27.

For 2022, AEP has a projected earnings growth rate of 5.3%. Valued at around $47.6 billion, AEP has gained around 9.3% in a year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.