31 Jul

Southern Company Beats Q2 Estimates, Keeps Vogtle Schedule

WRITTEN BY Vineet Kulkarni
  • Southern Company beat second-quarter earnings estimates.
  • The company maintained its Vogtle schedule and cost estimate.

Top regulated utility Southern Company (SO) reported its second-quarter earnings today. It reported adjusted EPS of $0.80, exceeding Wall Street’s expectations for the quarter. In the same quarter last year, it reported EPS of $0.80.

Southern Company Beats Q2 Estimates, Keeps Vogtle Schedule

Easing Vogtle’s worries

Southern Company made no changes to the estimated cost of its nuclear power project, Plant Vogtle. The project is 79% complete, and its two reactors will likely be in service by November 2021 and 2022. Several cost overruns and delays at Plant Vogtle negatively affected the utility’s earnings last year. However, Georgia regulators continue to voice concerns about Vogtle’s timeline because of its lingering risks and aging equipment.

Southern Company reported total revenue of $5.10 billion in the second quarter compared to $5.63 billion in the second quarter of 2018. This difference represents a fall of more than 9% in revenue mainly due to the sale of Gulf Power and Florida City Gas last year. Southern Company’s total retail electric sales fell more than 7% in the second quarter. Its total number of customers decreased by 8.6% in the quarter. So far this year, Southern Company has added net 23,000 residential electric and 14,000 gas customers due to strong jobs and population growth in the Southeast region. Its electric sales to industrial customers fell more than 5% mainly due to global trade concerns and changes in production levels.

Southern Company’s management maintained its full-year adjusted EPS guidance of $2.98–$3.10 for 2019. This guidance implies flattish earnings growth compared to 2018.

Southern Company stock

Southern Company stock has been on a solid uptrend this year. Favorable developments in its Vogtle project largely led this rally. The stock is up more than 25%, while the Utilities Select Sector SPDR ETF (XLU) has rallied 13% year-to-date. The Fed’s rate cut could bring some optimism among rate-sensitive utility stocks this week. Read Top Utility Stocks Might Rise as Rate Cut Hopes Grow.

According to Wall Street analysts’ estimates, SO has a mean price target of $56.0, suggesting flattish movement for the next 12 months. It’s currently trading at $55.3. Analysts are mostly cautious on Southern Company stock. Among the 19 analysts covering SO, 12 recommend “holds,” two recommend “buys,” four recommend “sells,” and one recommends a “strong sell.”

Renewables giant NextEra Energy (NEE) reported its second-quarter earnings results last year. Its adjusted earnings increased by approximately 13% compared to the second quarter of 2018. Read more in NextEra Energy’s Earnings: Solid Growth in Q2.

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