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Is Southern Company (SO) Poised for Earnings Beat in Q2? - Analyst Blog

Zacks Equity Research
Updated

We expect Southern Company SO to beat expectations when it reports second-quarter 2015 results before the opening bell on Jul 29. Last quarter, the company delivered a negative earnings surprise of 1.75%.   

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Southern Company is likely to beat earnings because it has the right combination of two key ingredients.  

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.43%. This is very meaningful indicator of a likely positive earnings surprise for Southern Company.

Zacks Rank: Southern Company carries a Zacks Rank #3 (Hold) which, when combined with a positive ESP, makes us confident of an earnings beat.    

Note that stocks with a Zacks Ranks #1, 2 or 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.  

What is Driving the Better-Than-Expected Earnings?

A leading utility holding company in the U.S. – Southern Company – dominates the power business across the southeastern region. 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 company’s history of consistent dividend payments indicates its confidence in itself.

We also appreciate the company’s cost reduction initiatives as seen in the previous quarter when its total operating expenses decreased more than 18% year over year.

Other Stocks to Consider

Here are some companies from the energy space which, according to our model, also have the right combination of elements to post an earnings beat this quarter.

Linn Energy, LLC LINE has an Earnings ESP of +133.33% and a Zacks Rank #1 (Strong Buy). The company is slated to release earnings on Jul 30.

Marathon Petroleum Corporation MPC has an Earnings ESP of +1.12% and a Zacks Rank #2 (Buy). The company is slated to release earnings on Jul 30.

Calumet Specialty Products Partners LP CLMT has Earnings ESP of +15.79% and a Zacks Rank #2. The company is likely to release earnings on Aug 5.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SOUTHERN CO (SO): Free Stock Analysis Report
 
LINN ENERGY LLC (LINE): Free Stock Analysis Report
 
MARATHON PETROL (MPC): Free Stock Analysis Report
 
CALUMET SPECLTY (CLMT): Free Stock Analysis Report
 
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Zacks Investment Research