Scalper1 News
Company undertaking growth investments to expand and improve regulated operations. Healthy capital outlook indicates that future growth will stay healthy. Company generates almost 90% of its consolidated earnings from regulated operations. Southern Company (NYSE: SO ) continues to stay a good investment prospect for income-seeking investors, as it offers a solid yield of 4.1% . The company has been undertaking growth investments to expand and improve its regulated operations, which will augur well for its long-term earnings growth. The company’s healthy capital outlook indicates that its future growth will stay healthy. Also, as the company generates almost 90% of its consolidated earnings from regulated operations, its future earnings visibility stays high. However, as the company has been constructing new power generating plants, there is a risk of delays and cost overruns. The construction of plants will weigh on the stock price in the near term and will limit any stock price upside. The company’s operational performance stays satisfactory. The company reported an operating EPS of $0.38 for 4Q’14, in line with analyst expectations. Also, the reported operating EPS of $2.80 for full year 2014 was in line with the consensus of $2.80. The company reported quarterly revenues of $4.01 billion for 4Q’14, representing an increase of 3% year-on-year. Revenue growth for the quarter was driven by healthy industrial sales growth of 2.3%. Moreover, the company reported strong full year 2014 revenue growth of 8.3% year-on-year. Also, the company is expecting total retail sales growth of 1.3% in 2015, which will be driven by 1.7% industrial sales growth. And the company provided the 2015 EPS guidance of $2.76-$2.88, representing an increase of 3-4% year-on-year. A key growth catalyst for Southern Company stays its healthy capital spending outlook . The company has planned to incur capital spending of $16.6 billion from 2015 through 2017, which will drive its future growth. The following table shows future capital spending. 2015 2016 2017 Capital Spending ($-billion) $6.8 billion $5.5 billion $4.3 billion Source: Investors Presentation The company’s operating performance stays satisfactory; however, the construction of ongoing power generating projects remains a risk to its future earnings, as I stated in my previous article. The company registered an incremental after tax charge of $43 million because of cost overruns and a delay in its Kemper project. The project is now scheduled to be in service in the first half of 2016. The company also announced an 18-month delay and an expected cost increase of $720 million for its Vogtle project. The construction of ongoing projects will weigh on the stock price. The company’s operating performance stays satisfactory. The impressive capital spending outlook will drive its future earnings growth, and the stock stays a good investment prospect for income-seeking investors. However, cost overruns and delays of ongoing construction projects will stay a risk for the stock price in the near term, and will limit any stock price upside. Also, the stock’s return in 2015 will be mainly dividend driven. Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. Scalper1 News
Scalper1 News