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Southern Co. (SO) Up 2.7% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
Wesco Aircraft (WAIR) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

A month has gone by since the last earnings report for Southern Co. (SO). Shares have added about 2.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Southern Co. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Southern Company Q4 Earnings Beat on Higher Retail Sales

Southern Company reported fourth-quarter 2018 earnings per share (excluding certain one-time items) of 25 cents, a penny above the Zacks Consensus Estimate. The outperformance stemmed from favorable regulatory results and strength of its retail unit.

However, Southern Company’s bottom line witnessed a fall from the year-ago quarter’s profit of 51 cents on lower sales from the wholesale segment.

The Atlanta-based utility’s quarterly revenue – at $5.3 billion – came 5.2% lower than the fourth-quarter 2017 sales but beat the Zacks Consensus Estimate of $4.9 billion.

Overall Sales Breakup

Southern Company’s wholesale power sales decreased 5.3%. This was partially offset by the marginal rise in retail electricity demand amid favorable weather conditions and constructive regulatory results.

Consequently, there was a downward movement in overall electricity sales and usage. In fact, total electricity sales during the fourth quarter was down 0.8% from the same period last year.

Southern Company’s total retail sales improved 0.7%, with residential and commercial sales going up by 3.7% and 0.1%, respectively. However, industrial sales declined 1.4%.

Expenses Summary

The power supplier’s operations and maintenance cost increased 2% to $1.7 billion, while the utility’s total operating expense for the period – at $4.8 billion – was down 3% from the prior-year level.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -9.2% due to these changes.

VGM Scores

At this time, Southern Co. has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Southern Co. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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