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The Atlanta, Georgia-based company generates, transmits, and distributes electricity through coal, nuclear, oil and gas, and hydro resources. It caters to utilities, electric cooperatives, and municipalities in Alabama, Florida, Georgia, Mississippi, and the Carolinas. The company serves about 4.4 million customers.
Electricity is part of life's necessities and such utility companies are comparatively less affected by the economic downturn. Additionally, as their area of operations is highly regulated, there is less turf competition. However, weather changes, such as cooler temperatures, can play a key role in the revenue generated by these companies.
In July, Southern said the economy continued to have a negative impact on earnings in the second quarter. The company noted that Industrial sales sustained the greatest impact, dropping 17.6% in the second quarter. Other negative drivers included decreased industrial base revenues. Southern Company Chairman, President and CEO David Ratcliffe, then said, "It is clear that as this challenging economy continues, our revenue erosion is significant, particularly among our industrial and manufacturing customers."
The company reported a 14% rise in second-quarter profit, reflecting lower operating expenses and the absence of charges recorded in the prior year, despite a drop in revenues. Net income available to common shareholders were $478.6 million or $0.61 per basic share, higher than last year's $416.4 million or $0.54 per basic share. Revenues for the quarter fell 7.8% to $3.885 billion from $4.215 billion in the year-ago quarter.
The company's operations are performed through subsidiaries, including Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Southern Power. For the second quarter, Alabama Power reported a 7% decline in operating revenues, while the drop was 11.2% at Georgia Power and 2.5% at Gulf Power. Second-quarter operating revenues of Mississippi Power declined 3.8% and that of Southern Power dropped 27.2% from last year.
Utility is one of areas that the Obama Administration wants to strengthen. The government wants to create a smart grid making use of smart meters and load-controllers. President Barack Obama on Tuesday announced a $3.4 billion federal investment in the creation of a "smart grid" for the nation's electricity. While creating new pathways for energy, investments in the smart grid would also create thousands of new jobs and save consumers more than $20 billion in electricity bills over the next 30 years. According to the Electric Power Research Institute, the implementation of smart grid technologies could reduce electricity use by more than 4% by 2030.
One hundred private companies, utilities, manufacturers, cities and other partners received the Smart Grid Investment Grant awards on Tuesday, including Southern, which was awarded $165 million. The company said the funds would be used to augment its investment in grid reliability, and make it more efficient and secure.
Last month, Fitch Ratings affirmed Southern's Issuer Default Rating at 'A'. The revision was attributed to the financial, operational strength and cash flow diversity of its four regulated electric utility subsidiaries, the low risk of its wholesale electric generation subsidiary, the constructive state regulatory environments in which the regulated subsidiaries operate as well as ample liquidity. The rating Outlook was set at "Stable".
Analysts at Jefferies & Co. reportedly upgraded Southern on October 1 to "Buy" from "Hold."
Among others in the industry, FPL Group Inc. (FPL | Quote | Chart | News | PowerRating) said Tuesday that its net income for the third quarter declined to $533 million, or $1.31 per share from $774 million or $1.92 per share in the year-ago quarter. Quarterly operating revenues declined 17.1% to $4.47 billion from $5.39 billion in the year-ago period.
Progress Energy Inc. (PGN | Quote | Chart | News | PowerRating), another peer, is slated to release its third-quarter financial results on October 30. Analysts expect the company to report earnings of $1.18 per share on revenues of $2.80 billion.
SO closed Tuesday's regular trade at $32.65, up $0.07 or 0.21%, on 4.29 million shares. For the past year, the stock traded in the range of $26.48-$37.62.
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