Wholesale Unit Helps Southern Company (SO) Top Q3 Earnings

Power supplier Southern Company (NYSE:SO) reported third-quarter 2017 earnings per share (excluding certain one-time items) of $1.12, above the Zacks Consensus Estimate of $1.08. The outperformance stemmed from robust performance of its wholesale unit and lower costs.

However, the bottom line deteriorated from the year-ago profit of $1.27 amid tepid retail electricity demand due to unfavorable weather conditions.

The Atlanta-based utility’s quarterly revenue – at $6,201 million – came slightly lower than the third-quarter 2016 sales of $6,264 million and also lagged the Zacks Consensus Estimate of $6,380 million

Overall Sales Breakup

While wholesale sales jumped 19.4%, Southern Company’s retail electricity demand softened amid mild weather conditions. This brought about a downward movement in overall electricity sales and usage. In fact, total electricity sales during the third quarter was down 0.6% from the same period last year.

Southern Company’s total retail sales slumped 5.6%, with residential and commercial sales down by 10% and 5.3%, respectively. Moreover, demand from industrial customers fell 0.5% from the year-ago period

Expenses Summary

Southern Company’s operations and maintenance cost decreased 8.8% to $1,287 million, while the utility’s total operating expense for the period – at $4,156 million – was down 4.4% from the prior-year level.

Zacks Rank & Stock Picks

Southern Company – one of the largest generators of electricity in the nation along with the likes of Exelon Corp. (NYSE:EXC) and Duke Energy Corp. (NYSE:DUK) – currently retains a Zacks Rank #4 (Sell).

A better-ranked player from the same industry would be NiSource Inc. (NYSE:NI) that sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Merrillville, IN based NiSource Inc. is an energy holding company and together with its subsidiaries provides natural gas, electricity and other products and services in the U.S. Its operating subsidiaries deliver energy to roughly 3.9 million customers in the Gulf Coast, Midwest and New England.

The 2017 Zacks Consensus Estimate for this utility is $1.19, representing some 9.9% earnings per share growth over 2016. Next year’s average forecast is $1.26, pointing to another 5.8% growth.

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