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Is A Beat In Store For Southern Company (SO) in Q4 Earnings?

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The Southern Company SO is set to release fourth-quarter 2019 results before the opening bell on Thursday, Feb 20. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of 26 cents per share on revenues of $5 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 beat the consensus mark on positive effects of rates and pricing changes, supported by favorable weather conditions at the firm’s regulated utilities. Southern Company reported earnings per share (excluding certain one-time items) of $1.34 that surpassed both the Zacks Consensus Estimate and the prior-year profit by $1.14. Meanwhile, the utility’s quarterly revenues – at $6 billion – beat the Zacks Consensus Estimate of $5.9 billion but was 2.7% lower than the third-quarter 2018 sales on account of loss of revenues from asset dispositions.

As far as earnings surprises are concerned, Southern Company is on a solid footing, having gone past the Zacks Consensus Estimate in three of the last four reports, with the average positive surprise being 8.21%. 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

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 part of that effort, Southern Company added 30,000 residential electric and 21,000 residential gas customers in the first nine months of 2019, a trend that most likely continued in the fourth quarter because of healthy population and job growth across its electric and gas franchises. Further, unseasonably warm temperatures toward the end of 2019 might have buoyed the performance of the utility through an uptick in electricity demand.

The utility’s operations and maintenance cost in the third quarter decreased 8% to $1.3 billion, while the utility’s total operating expense for the period – at roughly $4 billion – was essentially unchanged from the prior-year level. The falling cost trajectory is likely to have continued in the fourth quarter due to Southern Company’s prudent cost management efforts.

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 +0.78% and a Zacks Rank #3.

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

Other Stocks to Consider

Southern Company is not the only utility looking up this earnings cycle. Here are some other firms from the space 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 season:

NiSource Inc. (NI - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #3. The utility is scheduled to release earnings on Feb 26.

CenterPoint Energy, Inc. CNP has an Earnings ESP of +1.09% and is Zacks #3 Ranked. The utility is scheduled to release earnings on Feb 27.

Public Service Enterprise Group PEG has an Earnings ESP of +2.01% and is Zacks #3 Ranked. The utility is scheduled to release earnings on Feb 26.

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