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Is a Beat Likely for Southern Company (SO) in Q2 Earnings?

We expect Southern CompanySO to beat expectations when it reports second-quarter 2018 results on Wednesday, Aug 8, before market opens. The current Zacks Consensus Estimate for the quarter under review is a profit of 69 cents on revenues of $5,230 million.

In the preceding three-month period, the Atlanta, GA-based service provider beat the consensus mark by 4.8% on strength of its retail unit.

As far as earnings surprises are concerned, the electric utility firm is on a firm footing, having gone past the Zacks Consensus Estimate in each of the last four reports. This is depicted in the graph below:

Southern Company (The) Price and EPS Surprise

Southern Company (The) Price and EPS Surprise | Southern Company (The) Quote

Investors are keeping their fingers crossed and hoping that Southern Company can maintain the strong earnings trend. Thankfully, our model indicates that it might beat on earnings this time around too.

Let's delve deep to find out the factors likely to impact Southern Company's second-quarter results.

Why a Likely Positive Surprise?

Our proven model shows that Southern Company is likely to beat earnings in the to-be-reported quarter as it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.82%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Southern Company is #3 Ranked which, when combined with a positive ESP, makes us confident of earnings beat.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What's Driving the Better-Than-Expected Earnings?

A leading utility holding entity in the U.S., Southern Company dominates the power business across the Southeast. With a strong rate base growth and constructive regulation, we expect the firm to generate steady earnings.

Also, with operations in a stable and growing industry, Southern Company has a steady stream of cash flow. The utility's history of consistent dividend payments indicates its confidence in itself. In fact, management recently reiterated its long-term EPS growth rate guidance of approximate 5% growth in the next few years.

We further believe that the AGL Resources acquisition will be accretive to Southern Company earnings.

Other Stocks to Consider

Southern Company is not the only utility looking up this earnings season. Here are some firms from the space which, according to our model, also have the right combination of elements to post earnings beat this quarter

Southwest Gas Corp. SWX has an Earnings ESP of +4.84% and a Zacks Rank #2. The utility is anticipated to release earnings on Aug 6. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Sempra Energy SRE has an Earnings ESP of +0.43% and a Zacks Rank #3. The utility is anticipated to release earnings on Aug 6.

Cincinnati Bell Inc. CBB has an Earnings ESP of +46.15% and a Zacks Rank #3. The utility is expected to release earnings on Aug 8.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

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Cincinnati Bell Inc (CBB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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