SO beats adjusted earnings estimate

Southern Company (SO) reported its second-quarter financial results today. The company reported EPS of -$0.15 for the second quarter compared to its EPS of -$1.38 in the comparable quarter last year. Southern Company’s power plants continued to strain its financials in the quarter.

SO’s earnings in the reported quarter included an estimated loss of ~$1.1 billion related to increased project costs at its Plant Vogtle Units 3 and 4.

Plant Vogtle Dents Southern Company’s Q2 2018 Earnings

Adjusted for these charges, Southern Company saw EPS of $0.80 in the second quarter compared to EPS of $0.73 in the second quarter of 2017, displaying a healthy YoY (year-over-year) rise of ~10%. SO opened on a weak note on August 8, and it fell ~4% during early trading.

Earnings drivers

Southern Company’s total revenue came in at $5.63 billion in the reported quarter, a rise of 3.6% from its revenue in the same quarter last year.

Southern Company’s total electric deliveries, including retail and wholesale, increased 2.2% in the second quarter compared to the same period last year. Southern Company’s total number of customers increased 0.9% YoY in the quarter.

The company’s operating expenses totaled $5.56 billion in the second quarter, a fall from $7.08 billion in the second quarter of 2017. It incurred expenses of $3.0 billion in the second quarter of 2017 due to a loss at the Kemper County IGCC (integrated gasification combined cycle) plant after frequent delays and cost overruns.

Southern Company’s largest subsidiary, Georgia Power, owns a 45.7% share in Plant Vogtle. The project’s estimated cost has increased from $7.3 billion to $8.4 billion. The in-service dates from Plant Vogtle’s Units 3 and 4 remain unchanged at November 2021 and 2022, respectively.

Utilities have been lagging the broader markets this year. Southern Company stock is up ~4%, while utilities (XLU) (IDU) at large are up 2% year-to-date. The broader markets have soared more than 6% so far this year.

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