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Southern Company (SO) to Post Q1 Earnings: What to Expect?

Nilanjan Choudhury

Electric utility firm Southern Company SO is set to release its first-quarter 2017 results before the opening bell on Wednesday, May 3.

In the preceding three-month period, the Atlanta, GA-based service provider reported weaker-than-expected earnings due to increased operations and maintenance costs.

However, coming to earnings surprise history, Southern Company has a good record: its beaten estimates in 3 of the last four quarters.

Southern Company (The) Price and EPS Surprise


Southern Company (The) Price and EPS Surprise | Southern Company (The) Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

A leading utility holding entity in the U.S., Southern Company dominates the power business across the Southeast. With a strong rate base growth and constructive regulation, we expect the firm to generate steady earnings.

Also, with operations in a stable and growing industry, Southern Company has a steady stream of cash flow. The utility’s history of consistent dividend payments indicates its confidence in itself.

We further believe that the AGL Resources acquisition will be accretive to Southern Company earnings. 

However, with customer growth tepid and likely to remain so for some time, sales might be affected. This together with a large base, might make it difficult for Southern Company to manage rates. Higher operating and maintenance expenses is another concern.

Earnings Whispers

Our proven model does not conclusively show that Southern Company will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at 58 cents.

Zacks Rank: Southern Company’s Zacks Rank #4 (Sell) further decreases the predictive power of ESP, making us less confident of an earnings surprise call. 

As it is, we caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for Southern Company, here are some utilities you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

NiSource Inc. NI has an Earnings ESP of +4.69% and a Zacks Rank #2. The firm is expected to release earnings results on May 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ONEOK Inc. OKE has an Earnings ESP of +4.35% and a Zacks Rank #3. The utility is anticipated to release earnings on May 2.

Dominion Resources Inc. D has an Earnings ESP of +2.15% and a Zacks Rank #3. The company is likely to release earnings on May 4.

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Southern Company (The) (SO): Free Stock Analysis Report
NiSource, Inc (NI): Free Stock Analysis Report
Dominion Resources, Inc. (D): Free Stock Analysis Report
ONEOK, Inc. (OKE): Free Stock Analysis Report
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