Can Southern Company Q4 Earnings Overcome Weather Risks?

The Southern Company SO is set to release fourth-quarter results on Feb. 19. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a profit of 56 cents per share on revenues of $6.9 billion.

Let’s delve into the factors that might have influenced the power supplier’s performance in the December quarter. But it’s worth taking a look at Southern Company’s previous-quarter results first.

Highlights of Q3 Earnings & Surprise History

In the last reported quarter, the Atlanta, GA-based service provider beat the consensus mark due to investment in state-regulated utilities, along with usage and customer growth. Southern Company had reported adjusted earnings per share of $1.60, which surpassed the Zacks Consensus Estimate by $1.50. Sales of $7.8 billion also beat the consensus mark by 3.8%.

SO topped the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. The utility has a trailing four-quarter earnings surprise of 3%, on average. This is depicted in the graph below:

Southern Company (The) Price and Consensus

Southern Company (The) price-consensus-chart | Southern Company (The) Quote

Trend in Estimate Revision

The Zacks Consensus Estimate for the fourth-quarter bottom line has remained unchanged in the past seven days. The estimated figure indicates a 12% rise year over year. The Zacks Consensus Estimate for revenues, meanwhile, suggests an 8.3% increase from the year-ago period.

Factors to Consider

Weather remains a near-term earnings swing factor. In Q3, milder-than-normal conditions reduced year-over-year results, partially offsetting load growth benefits. Since retail electricity demand — particularly in the residential segment — can be temperature sensitive, a warmer-than-expected start to winter in the Southeast could limit heating-related usage in Q4. Although residential sales were up 2.7% in the third quarter on a weather-normal basis, actual results still depend on seasonal patterns, leaving fourth-quarter earnings somewhat exposed to climate variability.

Despite revenue gains, higher financing and depreciation expenses could have weighed on fourth-quarter profitability. Management acknowledged that increased depreciation and amortization, along with elevated interest costs, partially offset operating growth in Q3. The company issued $4 billion of long-term debt in the third quarter alone, which adds to financing obligations. With capital spending tied to its $76 billion investment plan through 2029, these higher carrying costs may have continued pressuring margins in Q4.

On a positive note, Southern Company headed into the fourth quarter with solid earnings visibility, backed by firm load growth and executed contracts. During the first nine months of 2025, weather-normal retail sales rose 1.8%. Meanwhile, commercial sales climbed 3.5% in Q3, including a 17% jump in data center demand. Management also signed four large-load contracts totaling over 2 gigawatts in the past few months, contributing to 7 gigawatts contracted through 2029. These agreements, structured with minimum bill protections, should provide steady incremental revenues into the year-end.

What Does Our Model Say?

The proven Zacks model does not conclusively predict an earnings beat for The Southern Company for the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of a beat. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -4.76%.

Zacks Rank: SO currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

While an earnings beat looks uncertain for The Southern Company, here are some firms from the utilities space that you may want to consider on the basis of our model:

IDACORP, Inc. IDA: It has an Earnings ESP of +1.13% and a Zacks Rank #2. IDACORP is scheduled to release earnings on Feb. 19.

You can see the complete list of today’s Zacks #1 Rank stocks here.

For 2026, IDA has a projected earnings growth rate of 9.6%. Valued at around $7.8 billion, IDACORP has gained 31.4% in a year.

The AES Corporation AES: It has an Earnings ESP of +0.54% and a Zacks Rank #2. The AES Corporation is scheduled to release earnings on Feb. 26.

The AES Corporation beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two, with the average being 14.7%. Valued at around $11.6 billion, it has surged 64% in a year.

Sempra SRE: It has an Earnings ESP of +4.73% and a Zacks Rank #3. Sempra is scheduled to release earnings on Feb. 26.

For 2026, SRE has a projected earnings growth rate of 11.8%. Valued at nearly $62 billion, Sempra has gained 12.7% in a year.

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This article originally published on Zacks Investment Research (zacks.com).

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