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Southern Company Q2 Earnings Top on Strong Electricity Sales

Electric utility firm Southern Company (SO) reported second quarter 2014 earnings per share (excluding certain one-time charges) of 68 cents, surpassing the Zacks Consensus Estimate of 67 cents and the year-ago adjusted profit of 66 cents. The strong results could be attributed to higher electricity usage on the back of favorable weather conditions, as well as robust industrial activity. These positives were partially offset by spiraling non-fuel operations and maintenance expenses.

The Southern Company - Earnings Surprise | FindTheBest

The Atlanta, GA-based power supplier’s quarterly revenue – at $4,467 million – comfortably surpassed the Zacks Consensus Estimate of $4,273 million. Moreover, Southern Company’s revenue came 5.2% higher than the second quarter 2013 level of $4,246 million.

Overall Sales Breakup

Colder-than-normal winter temperatures boosted Southern Company’s electricity demand. This brought about an upward movement in overall electricity sales and usage. Total electricity sales during the first quarter improved 4.7% from the same period last year.

Southern Company’s total retail sales rose by 2.1%, reflecting higher demand from residential customers, which increased by 2%. Commercial sales registered a year-over-year upward movement of 1.3%.

In particular, industrial sales were up by a healthy 3%, lifting Southern Company’s second 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 cost jumped 7.6% to $1,019 million, but the company’s total operating expense for the period – at $3,364 million – was approximately 6.7% lower than the prior-year level.

Zacks Rank & Stock Picks

Southern Company – one of the largest generators of electricity in the nation along with the likes of Exelon Corp. (EXC) and Duke Energy Corp. (DUK) – currently retains 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.

Meanwhile, one can look at Wisconsin Energy Corp. (WEC) as a good buying opportunity. This electric utility stock – sporting a Zacks Rank #1 (Strong Buy) – offers tremendous value and is worth buying now.

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