What Does Southern Company Have to Offer Investors in the Long-term?
Southern Company’s bottom line
Southern Company (SO) is effectively adapting to a changing utility industry. Historically, it concentrated on regulated electric operations, but recently, it has been investing in natural gas pipelines and renewables as well. Its focus on natural gas distribution bodes well for growth.
AGL Resources’ (GAS) acquisition will place Southern Company in a better position in gas distribution operations. However, the financing of this acquisition is expected to hamper its 2016 earnings. Its somewhat flat earnings guidance for 2016 may discourage investors.
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According to Wall Street analyst estimates, Southern Company (SO) has a median price target of $50.4. This indicates an estimated downside of 3.3% during the next year, as compared to its current market price of $52.2.
Of the 21 analysts tracking SO, one recommends it as a “buy” while 16 recommend it as a “hold.” Four have given a “sell” recommendation on SO as of June 28, 2016.
Duke Energy (DUK) has a one-year price target of $84, as compared to its current price of $80.6, which indicates a downside of 4%. Dominion Resources (D) has an estimated upside of 4% with a price target of $78. Dominion is currently trading at $75.
These utilities may add up to an attractive risk-reward proposition, considering their relatively impressive yields. The risk is also very low. Notably, Southern Company and Duke Energy have betas of 0.1 and -0.2, respectively.