NEW YORK (
) has been reiterated by TheStreet Ratings as a buy with a ratings score of A. The company's strengths can be seen in multiple areas, such as its notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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Highlights from the ratings report include:
- SOUTHERN CO's earnings per share declined by 14.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SOUTHERN CO increased its bottom line by earning $2.55 versus $2.36 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $2.55).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, SOUTHERN CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- SO, with its decline in revenue, slightly underperformed the industry average of 2.7%. Since the same quarter one year prior, revenues fell by 10.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- The gross profit margin for SOUTHERN CO is currently lower than what is desirable, coming in at 33.50%. Regardless of SO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SO's net profit margin of 10.70% compares favorably to the industry average.
The Southern Company operates as an electric utility company. It is involved in the generation, transmission, and distribution of electricity through coal, nuclear, oil and gas, and hydro resources. The company has a P/E ratio of 18.5, below the average utilities industry P/E ratio of 18.8and above the S&P 500 P/E ratio of 17.7. Southern has a market cap of $40.26 billion and is part of the
industry. Shares are up 0.1% year to date as of the close of trading on Wednesday.
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--Written by a member of TheStreet Ratings Staff.
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.