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What’s in Store for Southern Company Stock after Its Q4 Earnings?

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SO: Better-than-expected Q4 numbers

The Georgia-based regulated utility Southern Company (SO) released its fourth-quarter and 2018 earnings results last week. It reported adjusted EPS of $0.25 in the fourth quarter, exceeding analysts’ consensus estimate for the quarter ended December 31. Southern Company reported EPS of $0.51 in the fourth quarter of 2017.

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Earnings insights 

Southern Company reported adjusted EPS $3.07 in fiscal 2018, compared to $3.02 in 2017. Southern Company’s management sounded confident about its under-construction Plant Vogtle schedule on the earnings call. However, the project has exhibited several cost overruns and frequent delays over the last few years. In fact, it has negatively affected Southern Company’s market performance in this period.

Southern Company reported total operating revenues of $23.5 billion in 2018, an increase of just 2% compared to 2017. Electric utilities have been experiencing marginal top-line growth due to energy efficiency programs for the last several years.

Southern Company sold its Florida-based assets, including Elizabethtown Gas, Elkton Gas, Florida City Gas, and Pivotal Home Solutions, to NextEra Energy (NEE) last year.

Southern Company generates more than 90% of its earnings from regulated operations, which facilitates slow but stable earnings growth. The utility company reaffirmed its long-term adjusted EPS growth rate of 4%–6% through 2023, in line with utilities (XLU) at large. SO also provided an EPS guidance range of $2.98–$3.10 for 2019.

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