Southern Company Updates FY25 Adjusted EPS Guidance to $4.20-$4.30

Southern Company has backed its FY25 adjusted EPS view of $4.20-$4.30, which is in line with the consensus estimate of $4.28. The company's financial outlook is expected to be driven by strong demand for electricity and natural gas, as well as the completion of several major projects. The company is also benefiting from its diversified portfolio of businesses, which includes regulated utilities, unregulated wholesale generation, and energy-related services.

Southern Company (SO) has reaffirmed its fiscal year 2025 (FY25) earnings outlook, projecting adjusted earnings per share (EPS) to fall between $4.20 and $4.30. This forecast aligns closely with the consensus estimate of $4.28, indicating confidence in the company's financial performance for the upcoming period [1].

Southern Company, one of the largest utilities in the United States, serves approximately 9 million customers through its vertically integrated electric utilities in three states and natural gas distribution utilities in four states. The company owns 44 gigawatts of rate-regulated generating capacity, primarily serving customers in Georgia, Alabama, and Mississippi. Additionally, its subsidiary, Southern Power, owns 13 gigawatts of natural gas generation and renewable energy across the U.S., selling electricity primarily under long-term contracts. With a market capitalization of $104.32 billion, Southern Company is a significant player in the Utilities sector, specifically within the Utilities - Regulated industry [1].

The company's financial health is underscored by several key metrics. Revenue growth has been robust, with a trailing twelve-month (TTM) revenue of $27.85 billion and a one-year revenue growth rate of 9.2%. The company maintains a robust operating margin of 26.48% and a net margin of 16.54%, indicating efficient cost management. However, the company's debt-to-equity ratio of 2.07 suggests a reliance on debt financing, and the current ratio of 0.86 indicates potential liquidity constraints [1].

The Altman Z-Score of 1.06 places the company in the distress zone, implying a potential risk of bankruptcy within the next two years. Additionally, insider selling activity has been noted, with 25,493 shares sold over the past three months [1].

Southern Company's revenue trends reflect consistent growth, driven by its expansive utility operations and strategic investments in renewable energy. The company's operating margin expansion is a positive indicator of operational efficiency. However, the company's return on invested capital (ROIC) of 4.24% is below its weighted average cost of capital (WACC), suggesting potential inefficiencies in capital allocation [1].

In the Utilities - Regulated industry, Southern Company faces competition from other major players, but its extensive customer base and diversified energy portfolio provide a competitive edge. The company's focus on long-term contracts for its renewable energy projects further strengthens its market position [1].

Southern Company's valuation metrics indicate a modestly overvalued position. The current P/E ratio is 22.74, with a forward P/E of 22.2, suggesting expectations of stable earnings growth. The P/S ratio stands at 3.76, close to its 10-year high of 3.88. The P/B ratio is 3.08, nearing its 10-year high of 3.1. Analyst targets suggest a hold position, with a target price of $95.36 [1].

The company's financial performance for the second quarter of 2025 (Q2 2025) is notable. Southern Company reported earnings of $0.9 billion, or $0.80 per share, compared to $1.2 billion, or $1.10 per share, in the same period last year. For the six months ended June 30, 2025, the company reported earnings of $2.2 billion, or $2.01 per share, compared to $2.3 billion, or $2.13 per share, for the same period in 2024. Excluding non-GAAP adjustments, the company earned $1.0 billion, or $0.92 per share, during the second quarter of 2025, compared to $1.2 billion, or $1.10 per share, during the same period in 2024. For the six months ended June 30, 2025, excluding these items, Southern Company earned $2.4 billion, or $2.15 per share, compared to $2.3 billion, or $2.13 per share, for the same period in 2024 [2].

In conclusion, while Southern Company demonstrates strong revenue growth and profitability, its high debt levels and potential financial distress warrant caution. Investors should consider these factors alongside the company's competitive positioning and market sentiment when evaluating its investment potential.

References:
[1] https://www.gurufocus.com/news/3023212/southern-company-so-reaffirms-fy25-earnings-outlook
[2] https://www.prnewswire.com/news-releases/southern-company-reports-second-quarter-2025-earnings-302518169.html