According to analysts’ estimates, Southern Company (SO) has a one-year median price target of $50.88, implying an upside of a mere 3% in the next year, compared to its current market price of $49.36.
The chart above shows analysts’ views on Southern Company as of December 22, 2016. There are currently 20 analysts tracking Southern Company.
Peer Xcel Energy (XEL) has a median price target of $42.71, which implies an upside of 5% in the next year. According to analysts’ consensus estimate, Excelon Corporation’s (EXC) one-year median price target is $38, implying a 7% upside from its current price of $36.
Southern Company is expecting flattish EPS (earnings per share) growth this year due to a rise in its outstanding shares after its AGL Resources acquisition. The company’s management is targeting long-term EPS growth of ~5%, in line with the industry average.
According to the U.S. Energy Information Administration (or EIA), a colder-than-normal winter is expected in the United States from December 2016 to March 2017. Colder temperatures could raise US electricity consumption by nearly 4%. Higher demand could also boost power prices, which is likely to help utilities.
Following the Federal Reserve’s 0.25% interest rate hike in December 2016, US interest rates are expected to rise again in 2017. What really matters for utilities (XLU) and investors is the pace of the rate increase. A near-term interest rate hike could force investors to switch to Treasuries, leading to a slump in utilities stocks. Utilities (XLU) are currently trading at a ~100 basis point premium to Treasuries.