Southern Company (SO) Q3 Earnings on Deck: What to Expect
The Southern Company SO is set to release third-quarter results on Nov 2. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $1.32 per share on revenues of $8.4 billion.
Let’s delve into the factors that might have influenced the power supplier’s performance in the September quarter. But it’s worth taking a look at Southern Company’s previous-quarter results first.
Highlights of Q2 Earnings & Surprise History
In the last reported quarter, the Atlanta, GA-based service provider beat the consensus mark on lower-than-expected operating expenses. Southern Company had reported adjusted earnings per share of 79 cents, ahead of the Zacks Consensus Estimate of 74 cents. However, revenues of $5.7 billion came in 15.7% below the consensus mark, affected by tepid demand on the back of unfavorable weather, to go with the negative effects of rates, usage and pricing changes.
SO topped the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. The utility has a trailing four-quarter earnings surprise of 6.2%, on average. This is depicted in the graph below:
Southern Company (The) Price and EPS Surprise
Southern Company (The) price-eps-surprise | Southern Company (The) Quote
Trend in Estimate Revision
The Zacks Consensus Estimate for the second-quarter bottom line has been revised 1.5% downward in the past seven days. The estimated figure indicates a 0.8% improvement year over year. However, the Zacks Consensus Estimate for revenues suggests a slight 0.01% decline from the year-ago period.
Factors to Consider
Southern Company's seven major regulated utilities serve approximately nine million electric and natural gas customers. Leveraging the demographics of its operating territories, the firm has been successfully expanding its regulated business customer base. As proof of that effort, Southern Company added more than 24,000 new residential electric customers and in excess of 13,000 residential natural gas customers in the first half of 2023. This trend most likely continued in the July-September period of 2023 because of healthy economic development across its service territories.
On a somewhat bearish note, the power supplier’s fuel and retail electric sales in the second quarter might have been affected by tepid weather, which translates into lesser use of natural gas required to run electricity generators. This, in turn, is likely to have dragged down overall sales. In particular, our estimate for operating revenues is pegged at $8 billion, indicating a 4.2% drop from $8.4 billion reported in the year-ago quarter.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Southern Company is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Southern Company has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.32 per share each.
Zacks Rank: SO currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult this earnings season.
Stocks to Consider
While an earnings beat looks uncertain for Southern Company, here are some firms from the utilities space that you may want to consider on the basis of our model:
Consolidated Edison ED has an Earnings ESP of +3.93% and a Zacks Rank #2. The firm is scheduled to release earnings on Nov 2.
You can see the complete list of today’s Zacks #1 Rank stocks here.
For 2023, Consolidated Edison has a projected earnings growth rate of 7.9%. Valued at around $30.2 billion, ED has lost 0.6% in a year.
TransAlta Corporation TAC has an Earnings ESP of +15.26% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov 7.
For 2023, TransAlta Corporation has a projected earnings growth rate of 1,900%. Valued at around $2.3 billion, TAC has lost 12.7% in a year.
Ameren Corporation AEE has an Earnings ESP of +0.22% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov 8.
For 2023, Ameren Corporation has a projected earnings growth rate of 5.6%. Valued at around $19.8 billion, AEE has lost 8.6% in a year.
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