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Southern Company’s 4Q16 Earnings Fell on High Operating Costs

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Dec. 4 2020, Updated 10:53 a.m. ET

Southern Company’s earnings

Southern Company (SO) reported earnings of $0.24 per share for the quarter ended December 31, 2016. For the corresponding quarter in 2015, it reported earnings of $0.44 per share.

For the full year 2016, Southern Company earned $2.89, the same as in 2015. Southern Company’s more or less flat EPS was expected due to bonus depreciation and share issuances to fund its AGL Resources deal. Southern Company stock rose nearly 1.5% on its earnings day and closed at $48.99.

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Earnings drivers

Despite posting a healthy rise in revenues in the reported quarter, Southern Company couldn’t convert that to earnings. During 4Q16, the utility witnessed a huge rise of 48% in its operations and maintenance costs compared to the same period in 2015.

Southern Company gets more than 92.0% of its total earnings from regulated operations, which usually translates to earnings stability. Its capital spending plan of $39.3 billion for the next five years is likely to strengthen its regulated rate base further and may bode well for earnings growth. The company has also been increasing its focus on renewables.

Southern Company’s management has issued its 2017 earnings guidance range of $2.90–$3.02 per share. The guidance implies an expected annual rise of 5.0% from the midpoints, which is in line with the industry average. The management also released earnings guidance of $0.57 per share for 1Q17.

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