Revenue estimates versus actual
Over the last three quarters, Southern Company (SO) has missed revenue estimates. For 4Q15, analysts are expecting revenues of $4.6 billion against the company’s $4 billion in revenue in 4Q14. If Southern Company meets analysts’ estimates this quarter, it would be a 15% rise over 4Q14 revenues.
Revenue drivers in 4Q15
Earnings in 3Q15 were mainly driven by increased revenues from Southern Company’s regulated utilities. In 3Q15, Southern Company reported revenues of $5.4 billion, well below analysts’ estimates of $5.8 billion. In 3Q15, the company’s revenues increased due to robust employment growth, improvement in the housing sector, increased consumer spending, and continued in-migration into its service territory. Southern Company’s earnings in 4Q15 may have a positive impact on the growing southeastern economy.
Southern Company’s service territories were warmer in 4Q15 than in 4Q14. Its principal operational zones, Georgia and Alabama, recorded higher temperatures in 4Q15. This may drive the company’s revenues upwards due to increased electricity usage.
Southern Power, an unregulated segment of Southern Company, also posted a rise in revenues in 3Q15, due to the addition of renewable (TAN) capacity. However, Southern Power’s revenues fell from $1.7 billion in the first nine months of 2014 to $1.4 billion in the first nine months of 2015. This fall was mainly due to weaker power prices in its competitive segment. Southern Power is actively increasing its exposure in renewables (PBW) generation. Other utilities, such as Duke Energy (DUK) and American Electric Power (AEP), are also increasing their renewable generation fleet in order to attain a cleaner fuel mix.
In 2015, Southern Power announced 12 new renewable projects with a combined capacity of 1,000 megawatts. With this capacity addition, we may yet see some improvement in Southern Power’s revenues in the coming quarters.