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Analyzing Southern Company before Its 1Q17 Earnings

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Analyzing Southern Company before Its 1Q17 Earnings PART 1 OF 6

What Could Drive Southern Company’s 1Q17 Revenues?

Southern Company

Southern Company (SO) will report its 1Q17 financial results on May 3, 2017. According to analysts’ estimates, Southern Company is expected to report revenues of $5.25 billion in 1Q17—compared to revenues of $3.96 billion in 1Q16.

Analysts estimate more than a 30% rise in Southern Company’s 1Q17 revenues year-over-year. Favorable weather and Southern Company’s expanded gas operations after the AGL merger might help the company achieve analysts’ upbeat 1Q17 revenue expectations. However, Southern Company missed analysts’ revenue estimates in six of the last eight quarters.

What Could Drive Southern Company’s 1Q17 Revenues?

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Revenue drivers

Weather and customer base expansion are two important factors that could drive utilities’ revenues. Southern Company has been expanding its customer base for the last few quarters, which was reflected in its revenues. Its revenues to residential and commercial customers have been on an uptrend, while industrial sales have been falling in the last few quarters.

Southern Company obtains more than 85.0% of its revenues from regulated operations. With its AGL Resources acquisition, the company’s regulated rate base rose nearly 15.0% to $50.0 billion. An expanded rate base and more regulated gas distribution operations could improve Southern Company’s revenue going forward.

Southern Company’s coal-dominated generation mix has been shifting to low-emitting sources like natural gas and renewables. In 2016, the utility generated 47% of its total electricity from natural gas, while coal (KOL) accounted for 31%.

Among its peers, Duke Energy (DUK) will report its 1Q17 earnings on May 9, 2017. Renewables giant NextEra Energy (NEE) reported its earnings on April 21, 2017.

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