What Do Analysts Think About The Southern Company’s (NYSE:SO) Future?
As The Southern Company (NYSE:SO) announced its earnings release on 30 September 2018, analysts seem fairly confident, with earnings expected to grow by 25% in the upcoming year relative to the past 5-year average growth rate of -3.8%. By 2019, we can expect Southern’s bottom line to reach US$1.1b, a jump from the current trailing-twelve-month US$842m. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Southern in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Check out our latest analysis for Southern
Exciting times ahead?
The 15 analysts covering SO view its longer term outlook with a positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for SO, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
From the current net income level of US$842m and the final forecast of US$1.2b by 2021, the annual rate of growth for SO’s earnings is 9.5%. EPS reaches $3.2 in the final year of forecast compared to the current $0.84 EPS today. The primary reason for earnings growth is due to reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. With a current profit margin of 3.7%, this movement will result in a margin of 5.3% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Southern, there are three pertinent factors you should look at:
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Valuation: What is Southern worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Southern is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Southern? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
