Back to top

Image: Shutterstock

Why Southern (SO) Has Stumbled Since Q4 Earnings Beat

Read MoreHide Full Article

The stock of power supplier The Southern Company (SO - Free Report) has lost 1.9% since its fourth-quarter earnings announcement on Feb 16. The negative response, despite the earnings beat, could be attributed to another round of delay and cost overrun associated with its Vogtle nuclear project. 

What Did Southern Company’s Earnings Unveil?

The Southern Company reported fourth-quarter 2022 earnings per share (excluding certain one-time items) of 26 cents, beating the Zacks Consensus Estimate of 24 cents. The outperformance reflects the positive effects of rates, usage and pricing changes, plus a demand boost from favorable weather.

However, SO’s bottom line was lower than the year-earlier quarter’s adjusted profit of 36 cents per share, affected by a spike in operations and maintenance costs.

The utility reported revenues of $7 billion. The top line beat the Zacks Consensus Estimate of $6.1 billion and was 22.2% higher than fourth-quarter 2021 sales.

The firm guided earnings per share of $3.55-$3.65 for this year and 70 cents for the March quarter. Further, Southern Company management stuck to its long-term EPS growth rate projection of 5-7% based on the 2024 adjusted EPS projection of $3.95-$4.10.
 

Southern Company (The) Price, Consensus and EPS Surprise

Southern Company (The) Price, Consensus and EPS Surprise

Southern Company (The) price-consensus-eps-surprise-chart | Southern Company (The) Quote

 

Vogtle Updates

Per latest earnings presentation, Southern Company expects further delays in completing Units 3 and 4 of the Vogtle nuclear project. The utility’s revised in-service dates for the facilities are now May or June 2023 (unit 3) and late Q4’23-Q1’24 (unit 4). At the same time, Southern Company increased the share of its Georgia Power subsidiary in capital costs for the units by $201 million.

Overall Sales Breakup

Southern Company’s wholesale power sales edged down 0.4%, which was more than offset by a rise in retail electricity demand.

Overall, there was an upward movement in overall electricity sales and usage. In fact, total electricity sales during the fourth quarter were up 1.3% from the same period last year.

Southern Company’s total retail sales moved up 1.9%, with residential and commercial sales increasing 5.4% and 2.6%, respectively, while industrial sales fell 1.6% year over year.

Expenses Summary

The power supplier’s operations and maintenance cost rose 9.6% year over year to $2 billion, while the utility’s total operating expense for the period — at $6.9 billion — was up 13.3% from the prior-year level.

Zacks Rank & Stock Picks

Southern Company carries a Zacks Rank #3 (Hold).

Meanwhile, investors interested in the utility space could look at better options like NiSource Inc. (NI - Free Report) , Atmos Energy Corporation (ATO - Free Report) and CenterPoint Energy, Inc. (CNP - Free Report) . Each of the firms carries a Zacks Rank #2 (Buy).

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

NiSource: NiSource is valued at around $11.4 billion. For 2023, NI has a projected earnings growth rate of 5.4%.

NiSource delivered a four-quarter average earnings surprise of 0.2%. Headquartered in Merrillville, IN, NI shares have lost 8% in a year.

Atmos Energy: Atmos Energy is valued at around $16.1 billion. For fiscal 2023, ATO has a projected earnings growth rate of 7.1%.

Atmos Energy delivered a four-quarter average earnings surprise of 4.6%. Headquartered in Dallas, TX, ATO shares have lost 2.8% in a year.

CenterPoint Energy: CenterPoint Energy is valued at around $17.9 billion. For 2023, CNP has a projected earnings growth rate of 8%.

CenterPoint Energy delivered a four-quarter average earnings surprise of 2.1%. Headquartered in Houston, TX, CNP shares have lost 1.1% in a year.

Published in