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Southern Co. (SO) Down 2.2% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
Ross Stores (ROST) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

A month has gone by since the last earnings report for Southern Co. (SO). Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Southern Co. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. <p style="text-align: justify;"><u><strong>Second-Quarter 2018 Results</strong></u><br /><br />Southern Company reported second-quarter 2018 earnings per share (excluding certain one-time items) of 80 cents, above the Zacks Consensus Estimate of 69 cents and the year-ago profit of 73 cents.<br /><br />The outperformance stemmed from favorable regulatory results, strength of its retail unit and success of the company’s Southern Power renewable portfolio. These positives were partly offset by increase in operations and maintenance cost as well as by a charge associated with the construction of the Vogtle nuclear plant.<br /><br />The Atlanta-based utility’s quarterly revenue – at $5,627 million – came 3.6% higher than the second-quarter 2017 sales of $5,430 million and also beat the Zacks Consensus Estimate of $5,230 million.<br /><br /><strong>Overall Sales Breakup</strong><br /><br />Southern Company’s wholesale power sales increased 2.7%, while retail electricity demand strengthened amid favorable weather conditions. This brought about an upward movement in overall electricity sales and usage. In fact, total electricity sales during the second quarter was up 2.2% from the same period last year.<br /><br />Southern Company’s total retail sales improved 2%, with residential, industrial and commercial sales edging up by 5%, 0.6% and 0.8%, respectively.<br /><br /><strong>Expenses Summary</strong><br /><br />The power supplier’s operations and maintenance cost increased 15% to $1,559 million but the utility’s total operating expense for the period – at $5,564 million – was down 21.4% from the prior-year level.</p>

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Southern Co. has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. Notably, Southern Co. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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