Will Southern Company Miss Revenue Estimates This Quarter, Too?
Will Southern Company Fulfill Flat Growth Estimates in 1Q16?
Revenue estimates versus actual
In all four quarters of 2015, Southern Company (SO) missed revenue estimates by a fair margin. Analysts expect revenue of $4.3 billion from Southern Company in 1Q16.
In 1Q15, Southern Company reported revenues of $4.2 billion. We’ll have to wait until April 27 to see whether Georgia’s utility giant misses or beats revenue estimates this quarter.
Revenue drivers
In 2015, Southern Company’s regulated utilities were its key performers. Southern Company is effectively offsetting the lower electricity usage per customer by adding new customers to its existing base. Economic factors such as employment growth and improvement in the housing sector are also expected to positively contribute to revenue.
Southern Company’s management estimates a 1.1% rise in total retail sales in 2016 compared to 2015. However, as previously discussed, unfavorable weather during 1Q16 may dent the utility’s earnings to some extent.
Renewables
In the last few quarters, Southern Company has been aggressively investing in expanding its renewables portfolio through long-term contracts. In 2015, it contracted more than 1,000 megawatts of renewables with an average contract length of ~22 years.
Also, Southern Company is in the process of installing 210 megawatts of solar generation capacity through long-term contracts with utility-scale (VPU) and distributed generation–scale projects. This transition from traditional utility operating practices may improve Southern Company’s top line in the near future.
Along with Southern Company, utility leaders such as Duke Energy (DUK) and Dominion Resources (D) are also actively expanding their renewables portfolios. NextEra Energy (NEE) is already a global frontrunner in the renewable generation fleet.
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