Southern Company (SO) Surpasses Q3 Earnings Expectations, Provides Annual Guidance

In a remarkable turn of events, The Southern Company SO, a leading gas and electric utility holding company headquartered in Atlanta, Georgia, reported a robust third-quarter performance for 2023. The company achieved an earnings per share (EPS) of $1.42, which exceeded the Zacks Consensus Estimate of $1.32 and also surpassed the previous year's adjusted profit of $1.31. This impressive outcome is largely attributed to strategic reductions in operating expenses paired with beneficial weather conditions, rate adjustments, usage trends, and pricing modifications.

Revenue Insights and Yearly Forecast

Despite a strong earnings report, The Southern Company's revenue fell short of expectations, totaling $7 billion against the projected $8.4 billion. The decrease of 16.7% from the third quarter of 2022 was primarily driven by a reduction in industrial sales. Nonetheless, the firm has set an optimistic guidance, anticipating an EPS in the range of $3.55 to $3.65 for the full year.

Vogtle Project and Sales Dynamics

Significant advancements were made with the Vogtle nuclear project as Unit 3 commenced commercial operations, and Unit 4 is slated to become operational in early 2024. Meanwhile, a shift was observed in electricity sales. Total retail sales saw a 2.1% increase with the residential and commercial sectors recording rises of 4.6% and 3.7%, respectively. However, industrial sales took a hit, declining by 2.3%.

Operational Expenditures and Performance

Operational efficiency marked another achievement with a 6.7% year over year decrease in operations and maintenance costs, which amounted to $1.4 billion. The overall operating expenses also saw a significant reduction of 21.3% compared to the previous year, totaling $4.9 billion and falling well below the estimated $5.8 billion.

Peer Comparison and Investment Outlook

The Southern Company maintains a Zacks Rank #3 (Hold). However, investors casting a wider net in the utility sector might consider NiSource Inc. NI, Consolidated Edison ED, and New Jersey Resources NJR, each bearing a Zacks Rank #2 (Buy). These competitors show promising projected earnings growth rates for 2023 and have delivered varying degrees of earnings surprises over the previous four quarters. NiSource, with its base in Merrillville, Indiana, specializes as a fully regulated utility giant. Consolidated Edison, or ConEd, operates as a major investor-owned energy company out of New York. Lastly, New Jersey Resources delivers regulated gas distribution and energy services from its headquarters in Wall, New Jersey.

earnings, forecast, utilities