Southern Company (SO) Likely to Beat on Q1 Earnings - Analyst Blog

Electric utility firm Southern Company SO is scheduled to report first-quarter 2014 results on Apr 30, before the opening bell.

Why a Likely Positive Surprise?

Our proven model shows that Southern Company has the right combination of two key factors to beat earnings.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate of 56 cents and Zacks Consensus Estimate of 55 cents, stands at +1.82%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.

Zacks Rank: Southern Company has a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.   

The combination of Southern Company's Zacks Rank #3 and +1.82% ESP makes us confident of a positive earnings beat.    

What Will Drive Better-than-Expected Earnings?

Southern Company, one of the largest and best-managed electric utility holding companies in the U.S., has seen its stock rise 9% in the past six months. Additionally, Southern Company's fourth-quarter earnings grew over 9% year over year driven by higher electricity usage on the back of favorable weather conditions. Another beat could be around the corner for the premier energy firm as energy demand remains robust.

Last week, Southern Company announced a dividend increase, the 13th consecutive yearly hike, bringing the quarterly dividend to 52.50 cents per share ($2.10 annualized). The company's ability to maintain these hikes and continue enhancing shareholder value could lead to more good news for investors.

Moreover, Southern Company continues to earn returns that are among the highest in the industry, while at the same time maintain its position as a low-cost provider of electricity with superior customer satisfaction levels. The company's announcement of a 4– 5% 2014 EPS growth, during its fourth quarter release, gives a bullish outlook on the upcoming earnings.

Other Stocks to Consider

Southern Company is not the only firm looking up this earnings season. We also see a likely earnings beat coming from these 3 companies from the same industry:    

Edison International EIX, earnings ESP of +2.44% and Zacks Rank #2. The company is slated to release first quarter earnings on Apr 29.

Exelon Corporation EXC, earnings ESP of +6.94% and Zacks Rank #2. The company is scheduled to release earnings on Apr 30.

Calpine Corp. CPN, earnings ESP of +28.57% and Zacks Rank #2. The company is expected to release earnings before the opening bell on May 1.