Southern Company’s 4Q15 Revenues Fell 10% on Warmer Weather
Outlook
Southern Company’s (SO) management has provided surprisingly flat earnings guidance for 2016. The expected earnings for 2016 range from $2.76 to $2.88 per share. The management expects ~3.5% annual earnings growth to be offset due to the funding of the AGL Resources acquisition and bonus depreciation. According to the forecast, earnings in 2016 may lose $0.10 per share due to the impact of shares to fund AGL Resources’ (GAS) transaction and the estimated impact of bonus depreciation.
Southern Company’s power plants at Kemper and Vogtle are surely a game changer for the company due to their huge capacity and technological advancements. However, project delays and periodic incremental costs are a few of the major concerns. Kemper County is expected to be operational this year but units three and four of the Vogtle plant will not be operational until 2019 or 2020.
Price targets
According to Wall Street analyst estimates, Southern Company (SO) has a one-year price target of $47.30 against its current market price of $48.50. This accounts for a possible downside of 2.4% in one year.
Of the 21 analysts tracking Southern Company, 15 recommend it as a “hold” while five recommend it as a “sell.” One analyst recommends a “buy.” We may see higher price targets for Southern Company once it completes its AGL Resources (GAS) acquisition.
As for peers, Duke Energy (DUK) has a one-year estimated downside of ~3% according to analyst estimates. It has a price target of $75.90 against its current market price of $78.50. Utility giant NextEra Energy (NEE) has an estimated price target of $117.60. This amounts to a possible upside of 3%. NextEra Energy is currently trading at $114.70. We may see the higher price targets for utilities (IDU) considering the slow pace of interest rate hikes and growth in January 2016.
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