Southern Company's 1Q Earnings Miss

Zacks

Electric utility firm Southern Company (SO) reported first quarter 2013 earnings per share (excluding certain one-time charges) of 49 cents, below the Zacks Consensus Estimate of 51 cents. The weaker-than-expected results could be attributed to spiraling expenses.  

However, the company’s adjusted per share profits came ahead of the first quarter 2012 level of 42 cents, amid higher energy use.

The Atlanta, Georgia-based power supplier’s quarterly revenue – at $3,897.0 million – came 8.1% higher than the first quarter 2012 level of $3,604.0 million and also surpassed the Zacks Consensus Estimate of $3,744.0 million.

Near-normal temperatures across Southern Company’s core Southeast market, as against the unusually warm last one, boosted electricity demand for heating. This brought about an upward movement in overall electricity sales and usage. Total electricity sales during the first quarter improved 4.9% from the same period last year.

Total retail sales rose by 2.3%, reflecting higher demand from residential customers, which increased by 8.3%. Commercial sales registered a year-over-year upward movement of 1.2%.

However, industrial sales were down 2.1%, negatively influencing Southern Company’s first quarter results. With approximately a third of the company’s total retail sales coming from industrial customers, direction of the economy significantly affects the fortunes of Southern Company, as compared to other utilities that are less dependent on the industrial component.

Expenses Summary

Southern Company’s operations and maintenance expense increased slightly – by 0.7% year over year – the first quarterly rise following two successive decreases. Additionally, Southern Company’s total operating expense for the period, at $3,572.0 million, was approximately 25.9% higher than the prior-year level.

Outlook

Southern Company management indicated that it continues to see positive indications of economic growth in the Southeast region but admitted that pace remained slow.

Zacks Rank

Southern Company currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

However, there are certain other electric utility stocks like Brookfield Infrastructure Partners L.P. (BIP), Huaneng Power International Inc. (HNP) and Pike Electric Corp. (PIKE) that offer tremendous value and are worth buying now. All these companies sport a Zacks Rank #1 (Strong Buy).
 

Read the Full Research Report on SO

Read the Full Research Report on BIP

Read the Full Research Report on PIKE

Read the Full Research Report on HNP

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