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Southern Company’s Earnings: What to Expect in Q2

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We expect Southern Company’s (SO) second-quarter earnings on July 31. According to consensus estimates, the utility will likely report an EPS of $0.73 for the quarter ending June 30. In the same quarter last year, Southern Company posted an EPS $0.80.

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What could impact Southern Company’s earnings?

Investors are waiting for management’s commentary on Plant Vogtle. More than an earnings miss or beat, Southern Company’s stance on Plant Vogtle could drive the stock higher. After delays and cost overruns, Plant Vogtle appears to be in a better position this year. There haven’t been any changes in the project cost or schedule. In the first quarter, the company reported that Plant Vogtle was 77% complete. The two units will be operational in November 2021 and 2022.

According to analysts, Southern Company will report total revenues of $5.20 billion in the second quarter—more than 8% lower than the first quarter. Mild weather during the second quarter might be behind the lower revenues. Southern Company sold Gulf Power and Florida City Gas to NextEra Energy (NEE) last year. The sale might have a negative impact on the company’s top line. On the flipside, Southern Company’s customer base growth might boost its revenues.

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Southern Company still relies heavily on coal for power generation. In the first quarter, approximately 23% of the total generated power came from coal. Natural gas contributed 47%, while renewables contributed 14% in the first quarter. Southern Company plans to install approximately 2.2 gigawatts of new renewables capacity this year, which will take its clean generation to 22%.

Southern Company gave an adjusted EPS guidance range of $2.98–$3.10 for 2019. The guidance range indicates a marginal fall compared to the company’s earnings in 2018.

NextEra Energy maintained its superior earnings growth in the second quarter. The company reported adjusted earnings of $2.35, which beat analysts’ expectations. To learn more, read NextEra Energy’s Earnings: Solid Growth in Q2.

Analysts’ views

Southern Company stock is one of the top rallied stock among utilities. The stock has risen more than 25%, while the Utilities ETF (XLU) has risen 15%. Analysts are cautious about Southern Company stock. Currently, many top utility stocks trade at a premium valuation. Among the 19 analysts covering Southern Company, 12 recommended a “hold,” two recommended a “buy,” four recommended a “sell,” and one recommended a “strong sell.” Based on the consensus estimates, Southern Company stock has a mean target price of $55.97, which implies flattish movement for the next year. Currently, the stock is trading at $55.74.

Guggenheim Securities raised Southern Company’s target price from $52.0 to $56.0 last week. Credit Suisse also increased Southern Company’s target price from $51.0 to $56.0.

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