The Southern SO 2025Q2 Earnings Preview Downside Risk as EPS Declines

Forward-Looking Analysis
Southern Company is expected to report its 2025 Q2 results with anticipated revenue of $6.403 billion, marking a year-over-year decrease of 0.92%. The earnings per share (EPS) forecast stands at $0.88, reflecting a significant drop of 20.12% from the previous year. This decline is attributed to higher operating costs and potential tariff impacts. Analysts have maintained a moderate buy consensus on Southern's stock, underlining cautious optimism. The company's guidance for 2025 suggests an adjusted EPS range of $4.20 to $4.30, with the midpoint indicating a 6% growth. While the company anticipates some challenges, including declining residential electricity sales, it remains upbeat about commercial and industrial sales growth, particularly in data center sales, which have increased by 11% year-over-year. Southern aims to navigate these pressures with disciplined execution and a strong credit rating.

Historical Performance Review
In the first quarter of 2025, Southern Company reported revenue of $7.43 billion, net income of $1.27 billion, and EPS of $1.21. The company's gross profit reached $5.36 billion, underscoring strong financial performance. The Q1 results exceeded expectations, supported by robust commercial and industrial sales and record-breaking EPS growth. Despite weather-related impacts and increased depreciation costs, Southern managed to outperform its earnings estimates, demonstrating operational resilience and effective strategy execution.

Additional News
Southern Company is projected to grow its earnings and revenue by 6.9% and 4.1% annually, respectively. Its return on equity is expected to be 13.3% over the next three years. The company has also approved an $0.08 per share increase in annual dividends, marking the 24th consecutive year of dividend growth. Southern is focused on economic development, announcing over $11 billion of capital investment and more than 4,000 new jobs within its electric service territories in Q1 2025. Additionally, Southern is optimistic about its large load pipeline, with over 50 gigawatts of potential incremental load expected by the mid-2030s, supported by 10 gigawatts of project commitments.

Summary & Outlook
Southern Company’s financial health remains solid, with strong Q1 results underscoring effective management. However, the anticipated decline in Q2 EPS signals potential challenges, particularly from higher operating costs and tariff impacts. Despite these risks, Southern’s growth in commercial and industrial sectors and its strategic investments position it for future success. The company's consistent dividend increases and robust economic development activities further bolster its positive outlook. Given these mixed signals, the outlook remains neutral, balancing growth opportunities with the need for caution amid current economic pressures.