Latest news with #SouthernCo
CNBC
19-05-2025
- Business
- CNBC
Best stocks: 2 stocks from the aerospace defense industry on the verge of breaking out
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh here — In today's report we're going to talk about where the strength is in this market and, just as importantly, where it isn't. Industrials are on the leaderboard in a major way this week, thanks to aerospace and defense stocks breaking out to all-time highs. Some of the names in this group are already extended technically, but we'll show you two set-ups that aren't. Utilities are another story. Earlier this year the utility trade was working beautifully thanks to a combination of its defensive characteristics, as well as continued enthusiasm for the AI trend. But the market has changed character since the April low and these stocks have now fallen out of favor. Sean is going to show you what's happening broadly and dig into the rotation a bit. Then I'll chime in with a pair of defense companies worth keeping on your radar, pun intended. Sector Leaderboard As of 5/19/2025 morning, there are 102 names on The Best Stocks in the Market list Top Sector Ranking: Top Industries: Utilities falling off The Best Stocks List Removed: Duke Energy Corp (DUK), American Water Works Co Inc (AWK), Southern Co (SO), American Electric Power Co Inc (AEP), Consolidated Edison Inc (ED) Sean: Southern Co. (SO) and four other utility firms fell off our list last week — this is why we keep a dynamic list of stocks. The market is constantly rotating, and we just saw the early innings of a shift under the surface. During the first few iterations of the Best Stocks in the Market, the utilities sector was the most populous sector on our list. On May 5th and May 12th, there were 14 utility firms on the list, making them the first and second strongest sector for those weeks, respectively. Utilities are considered a defensive sector within portfolios because they provide essential services that customers would not (or cannot) turn off. Electricity, water, gas — consumers will continue to use regardless of economic conditions. You will be ditching Netflix, your car, McDonalds, and any other discretionary items before you cut off power or water. This consistent demand results in stable revenues and predictable cash flows, which often support reliable dividend payments, and as a result, utility stocks tend to exhibit lower volatility and higher yields. During periods of market stress or economic downturns, investors will often hide out in these names while chaos occurs in the more exciting, growth-oriented sectors of the market. That's what happened earlier this year, and that's what is currently happening on our list. From the first trading day of the year through April 3rd (Liberation Day) investors had been buyers of utilities and sellers of the S & P 500: At the bottom on April 8th, on a total return basis, utilities were down 3% for 2025 while the S & P 500 was down 15%. Being defensive paid off. However, from the bottom, we have seen a lightning fast V-shaped recovery, and momentum is swinging back to the higher growth categories. Tech is up an extraordinary 30% from April 8, while consumer discretionary stocks and industrials are up 22% from that date, rounding out the top 3 best performing sectors from the bottom. Digging into tech a bit further - from the market bottom, the VanEck Semiconductor ETF (SMH) was up 36.7%, marking the best 28-day return for the SMH since inception in 2011. This is a great example of momentum and an interesting use case for keeping a list of momentum-oriented names. This list gives us a market barometer, measuring what's going on under the surface. And right now, the market is rotating out of its defensive posture. On May 13 last week, five utility sector stocks fell below their 200 day moving average, removing them from our list: AEP, AWK, DUK, ED, SO. As it stands, industrials, tech, and financials are all flashing signs of momentum, while utilities have fallen to fourth on our sector dashboard. We aren't making predictions as to where the market will go next, but we are taking note as to what's working well and what isn't, and utilities are lagging while growth-oriented areas of the market are taking their leadership back. Best Stocks in the Aerospace & Defense industry: Josh: Now let's take a look at where the strength is. As Ed Yardeni wrote this week, President Trump has gone from "Tariff Man" to "Sales Man" during his whirlwind trip through the Middle East and a major airplane order was one of the highlights. UAE's Etihad Airlines committed to buying 28 wide-body Boeing aircraft with GE engines for $14.5 billion. In the table below, a list of the Aerospace & Defense names on the Best Stocks list at the moment. GE Aerospace, Boeing and Howmet Aerospace have been on a monster run but they look overdone in the short-term, with screaming-hot RSI readings approaching 80 (most technicians consider 70 or above to be overbought). But there are two names on our list that are just now breaking out and haven't gotten as far as the others yet: Axon Enterprise (AXON) Josh: First up, a company whose products you've heard of even if you don't know the name. Axon Enterprise (AXON) is a public safety technology company headquartered in Scottsdale, Arizona, best known for its TASER conducted energy weapons, body-worn cameras, in-car video systems, and cloud-based digital evidence management platform, Axon Evidence. Their products and services are primarily sold to law enforcement agencies, federal and military organizations, corrections departments, and increasingly to private sector clients in industries like retail and logistics. During its last earnings report, Axon raised revenue guidance for the full year to between $2.6 billion and $2.7 billion thanks to strong demand for both hardware and software from its customers. Risk Management: Josh: As you can see below, this is a breakout in progress. Short-term traders would use $700 as a pivot point. Investors may want to set a stop at the top of that gap around the $600 level. A pullback on light volume could help the stock work off its slightly overbought momentum and may provide a good entry. RTX Corp (RTX) Josh: I also want to show you RTX, which is the merged company formed when Raytheon acquired United Technologies back in 2023. RTX has three core businesses — Pratt & Whitney, Collins Aerospace, and Raytheon. They sell aircraft engines, avionics, missile defense systems, satellites as well as cybersecurity solutions. RTX's customers include government defense agencies, commercial airlines and space programs. This year they're projecting 2025 revenues of up to $84.0 billion and earnings per share between $6.00 to $6.15. RTX is on the verge of breaking out. As you can see below, the $135 level had been resistance this spring but the stock is back at that high and challenging. Momentum is solid on this retest and not yet overbought. Risk Management: Josh: I like the rising 200-day at $122 as a trailing stop. I would revisit it every Friday at the close. So long as the stock stays in that uptrend on a weekly closing basis, I think you can be long. DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. 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Yahoo
02-05-2025
- Business
- Yahoo
Q1 2025 Southern Co Earnings Call
Greg MacLeod; Director, Investor Relations; Southern Co Chris Womack; Executive Chairman of the Board, President, Chief Executive Officer; Southern Co Daniel Tucker; Chief Financial Officer, Executive Vice President; Southern Co Carly Davenport; Analyst; Goldman Sachs Julien Dumoulin-Smith; Analyst; Jefferies LLC Nicholas Campanella; Analyst; Barclays Jeremy Tonet; Analyst; JPMorgan Andrew Weisel; Analyst; Scotiabank David Arcaro; Analyst; Morgan Stanley Durgesh Chopra; Analyst; Evercore ISI Travis Miller; Analyst; Morningstar Operator Good afternoon. My name is Paul, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company first-quarter 2025 earnings call. (Operator Instructions) As a reminder, this conference is being recorded.I would now like to turn the call over to Mr. Greg MacLeod, Director, Investor Relations. Please go ahead, sir. Greg MacLeod Thank you, Paul. Good afternoon, and welcome to Southern Company's first-quarter 2025 earnings call. Joining me today are Chris Womack, Chairman, President and Chief Executive Officer of Southern Company; and Dan Tucker, Chief Financial me remind you that we will make forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K, Form 10-Q and subsequent securities filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning as well as the slides for this conference call. which are both available on our Investor Relations website at this time, I'll turn the call over to Chris. Chris Womack Thank you, Greg. Good afternoon, and thank you for joining us today. As you can see from the materials that we released this morning, we reported adjusted earnings results for the first quarter above our estimate, with year-over-year growth reflected across all our major businesses. The Southeast has a track record of economic resilience, and we continue to be encouraged by robust economic development activity that includes a sizable large load pipeline. Our state-regulated electric utilities continue to experience customer growth and the service territories that we are privileged to serve remain attractive to a wide variety of commercial and industrial the reliability and the resilience of our vertically integrated and well-planned grid approving hard to beat and customers especially data center customers are increasingly acknowledging that reality with their enthusiasm for our electric service I turn the call over to Dan, we know there is a great deal of interest in tariffs and any potential implications to our business. There's clearly policy uncertainty and in turn, our assessment of tariff implications have varied. For our base capital plan, we currently estimate a range of 1% to 3% of potential cost increases with the top of the range representing the higher end of tariffs that existed for only a few days last month. among the advantages for our company of our scale as a large portfolio of suppliers and strong vendor relationships to help navigate such challenges collaboratively and example, while the majority of materials being sourced from Mexico and Canada qualify for zero tariffs because they comply with the United States, Mexico, Canada agreement or USMCA. The company is working proactively to get any remaining vendors or purchases compliant as well. Our full complement of potential mitigations includes existing project contingencies contractual provisions, potential regulatory approaches and options to deploy alternative resources. Our commitment to affordability, balanced with our focus on reliability could also influence the pace of our capital deployment to mitigate the impact of tariffs on our customers. Overall, we do not expect a material impact to our financial outlook remains strong, and we remain focused on disciplined execution. The orderly processes and constructive regulatory frameworks in our service territories combined with our experienced team and our customer-centric business model should serve us well as we prioritize reliable and affordable energy for our 9 million-plus I'll now turn the call over to you for a financial update. Daniel Tucker Thanks, Chris, and good afternoon, everyone. For the first quarter of 2025, our adjusted EPS was $1.23 per share $0.20 higher than the first quarter of 2024 and $0.03 above our estimate. The primary drivers of our performance for the quarter compared to last year were investments in our state-regulated utilities and weather-related impacts, which added $0.08 year over year due to a milder than normal first quarter in 2024 and a slightly colder than normal first quarter for 2025. This was partially offset by higher operating costs and depreciation and amortization. A complete reconciliation of year-over-year earnings is included in the materials we released this adjusted EPS estimate for the second quarter is $0.85 per share. Overall, weather-normal retail electricity sales to all classes were 0.3% lower than the first quarter of 2024. The lower sales for the quarter were driven largely by usage impacts on our residential customer class, which was partially offset by customer additions. These use per customer trends in the first quarter were consistent with our sales forecast for the year, including the approximately 1% year-over-year negative impact of having an extra day in the first quarter of 2024 which affected all customer segments also believe return to office trends and customers' proactive management of their energy consumption in response to inflation and economic uncertainty continue to be factors as well. Commercial and industrial sales were higher compared to the first quarter of 2024 and as we saw continued strength in data center sales, which were up 11% year-over-year, office buildings, which were up 4% and the transportation sector which increased 4% year-over-year, primarily driven by the Hyundai Mega plant in Southeast Georgia, beginning production activities several months broadly, the economy in the Southeast remains well positioned with unemployment rates and recent population growth in our service territories better than the national averages. Additionally, economic development activity in the first quarter was robust. With announcements totaling over $11 billion of capital investment and more than 4,000 new jobs announced in our electric service territories. As we look ahead, our large load pipeline across our electric subsidiaries which includes data centers and large manufacturers continues to grow totaling more than 50 gigawatts of potential incremental load by the mid-2030s. We with project commitments totaling 10 gigawatts and ongoing advanced discussions for even more interest from large load customers in our service territories continues to be we've consistently communicated our disciplined approach to forecasting means that our sales forecast only assumes a fraction of this pipeline materializes. Georgia Power's ongoing 2025 Integrated Resource Plan or IRP filed earlier this year, includes continued investment in the existing fleet with proposed plant life extensions uprates for more capacity at existing nuclear and natural gas facilities and the modernization of hydro facilities as we continue to plan our resources to economically and reliably serve our customers for the long term. Resolution of the 2025 IRP is expected in mid-July. Also in Georgia, the regulatory process continues for 13 gigawatts of new energy resources via competitive request for proposals or company-owned resources were submitted into these valuations. Successful bidders are expected to be notified in the coming months for a substantial portion of these RFPs, including 8.5 gigawatts of all source or technology-agnostic energy resources. Georgia Power expects to file for certification of all projects awarded under these RFPs with the Georgia Public Service Commission in July. Considering the time line of these ongoing Georgia regulatory processes, we expect to be positioned to provide additional color on potential updates to our capital expenditure outlook and associated financing plan on our second quarter earnings call. All else being equal, this potential incremental capital and continued economic development momentum, are key to supporting our potential reevaluation of the base for our long-term EPS growth as early as I turn the call back over to Chris, I'd like to provide an update on our financing activities through the first quarter. Our state-regulated electric subsidiaries have issued $2.2 billion of long-term debt year-to-date, which is nearly half of 2025's projected financing needs for those entities in our base plan. Quality and credit strength of our subsidiaries continue to draw robust investor interest, providing strong excess to capital and supporting lower interest cost for the benefit of the parent company, we have issued approximately $2.4 billion of junior subordinated notes or JSN year-to-date, which received 50% equity treatment from the rating agencies. We've also entered into forward contracts through our at-the-market program, or ATM, for the sale of an additional $1 billion of common stock with settlements extending as late as the second half of 2026. Collectively, the ATM and the JSNs equate to $2.2 billion of equity and equity equivalents. Combined with approximately $350 million of annual equity issuances we forecast through our internal plans. We have a clear path in place to fully address the $4 billion 5-year equity needs in our base disciplined approach in sourcing equity reinforces our commitment to maintaining strong investment-grade credit ratings and our journey to 17% FFO to debt, while also focused on delivering value to shareholders, and we are well positioned to continue to finance any incremental growth opportunities above our base plan in a credit supportive and shareholder-focused fashion.I'll now turn the call back over to Chris. Chris Womack Thank you, Dan. Last week, the Southern Company Board of Directors approved an $0.08 per share increase in our annual common dividend, raising the annualized rate to $2.96 per share. This action marks our 24th consecutive annual increase, and this will now be 78 consecutive years, dating back to 1948. Southern Company has paid a dividend that is equal to or greater than the previous year. We are incredibly proud of our dividend track record, which continues to be an integral part of Southern Company's long-term value Company has consistently delivered regular, predictable and sustainable adjusted results, and our start to this year provides a solid foundation to continue executing on our goals for 2025 and beyond. We remain very excited about the future of this company. Thank you, as always, for your interest in Southern we are now ready to take questions. Operator (Operator Instructions) Carly Davenport, Goldman Sachs. Carly Davenport Maybe just to start on the 2Q EPS guide, the $0.85 represents fairly sizable downside relative to what you guys said last 2Q and '24. Could you just talk a little bit about the puts and takes there that drive that estimate, particularly relative to the stronger 1Q print? Daniel Tucker So there's two big factors in there, really. One is weather. Year-over-year, there's a pretty substantial weather differential. If you're thinking about what normal weather in our forecast relative to a really strong kind of warmer-than-normal quarter a year then the other one is really just what I'd characterize as timing. There are kind of recurring normal course transactions that happen within the Georgia transmission system that is mutually owned amongst all the parties in the state, not so Georgia Power, the municipals that represents the co-ops. And there are ongoing transactions to transfer ownership of assets kind of commensurate with their loads. So we had a sizable transaction that occurred in the second quarter of last year, and there's none anticipated similarly in the second quarter of this year. Those are the two big drivers. Carly Davenport Got it. Great. That's helpful. And then maybe just on the Georgia Power load pipeline. Just any update you can provide in terms of size of the pipeline, what's contracted, what's broken ground similar to the disclosures that you guys have provided in prior then just more broadly, anything you could share on conversations you're having with your data center customers in Georgia and if there's been any change in tone just given the macro environment relative to last quarter? Daniel Tucker Chris, why don't you start with any change in tone, and I'll hit the number. Chris Womack Yes, Carly. I mean, I think what we've seen is that we've not seen a shift in tone. I mean, I think as you seen a few hyperscalers make some announcements in the past couple of days about capital budgets. I think that's what we have seen in terms of our conversations all across our service territory with these data center and hyperscaler customers in terms of looking to continue to make those investments to support their business strategies now and into the future. So we still see a robust degree of high economic activity in our service territory. Daniel Tucker Yes. And then when it comes to the pipeline itself, Carly, you asked about the Georgia pipeline. I mean, in total, again, going out to the mid-2030s. It's about 52 gigawatts in Georgia alone. The contracted piece is 4 gigawatts, that same number, the committed is 8 gigawatts.I think the more interesting thing that you'll see when Georgia Power makes its filing here in the coming weeks is actually a shift forward in interest. So the more near-term pipeline, the 2028, 2029 kind of number is actually moving up, which is actually and interesting and also exciting thing to see happening in the pipeline. Operator Julien Dumoulin-Smith, Jefferies LLC. Julien Dumoulin-Smith So let me just follow up a little bit where Carly just left it off there because I know in the quarter, there's been a lot of talk about Microsoft and others that you're dealing with directly in your service there's a perception. You just hit it. But are you seeing any churn in the underlying composition of who and the kind of data centers and the geography that you're seeing? Again, I know folks are at times are super fixated on one or two out there. But listening to your comments here, I mean, even if you got fixated on one specific site, it seems like you're still seeing an aggregate acceleration in the I'd love to hear you reconcile in your comments again against some of the concerns about one or two discrete data points here. Chris Womack And June, I think you said it very well. I mean, there's a, I guess, aggregate -- I use the word diversity of customers. I mean, from the one or two or three or four hyperscalers to developers as well. I mean so I think we see kind of a wide diverse nature of interest that is showing up in our territory. And that momentum continues to exist.I mean, so it's not just one or two. It's -- I think it's what we see as across the board in terms of the conversation and the interest that we are seeing. Julien Dumoulin-Smith Awesome. Yes. I appreciate the commentary as possible here. And you guys provided some nice details on equity and overall financing plan here. Can you elaborate a little bit as you think about marrying up an improving balance sheet with your comments about the rebate potentially in ' and how do you think about getting to that 17% and reconcile that, I guess, the entire (inaudible) Do you think you'd be at 17% by the time you kind of reevaluate, should we say, your EPS commitments there? Daniel Tucker Julien, I think a bit more as having line of sight on it, and I think we've said this before. So everything in kind of a measured way in financing all of our capital with the right mix to kind of get there, the biggest, as we've highlighted before, the biggest driver of improvement in the short term. is really debt associated with certain regulatory assets rolling off. Right now, on the books there's about $2 billion, really just at Georgia Power alone between the remaining under-recovered fuel from a few years ago. There's about $1 billion of that and then a little over $800 million of storm costs from Hurricane those costs get recovered over the next few years, that naturally on its own kind of brings the number up. The other offsetting factor will be -- and I think this was a bit implicit in your question is the capital plan and particularly if we have incremental opportunities to deploy capital, that could adjust the shape of our journey to 17% a little bit and perhaps push it out a year or two. But I think getting to the heart of your question, by the time we get to 2027 or whenever that time comes, Will we be there? No. But will we need to have confidence that we can see it in the foreseeable future, I think that's how we'll be positioned. Julien Dumoulin-Smith Yes. Thank you for understanding the gist of it. I appreciate it, Dan. Best of luck, Chris, nicely done. Operator Nick Campanella, Barclays. Nicholas Campanella So a question on the rebates, just trying to kind of understand a little bit more what that would look like. And I guess the question is, do you anticipate kind of being at the higher end of your 5% to 7% through '27, and that would kind of equate to like a new higher base for '27 to grow off of. Is it just going to be based off of actuals and where you get to? Just -- I guess I'll leave it there, but just looking for more color on the interim. Daniel Tucker Sure. Nick, yes. And what I'll do is I'll just kind of restate the way we said it on our last call because again, nothing has changed in the 10 weeks since then in terms of how we think about this. It's to the extent that this incremental capital opportunity that we pointed to emerges. And to the extent that this data center in particular momentum continues and all else being equal, yes, we believe that in the back half of our plan, we could be positioned at or near the top of our existing we also pointed the headwinds in the near term, like parent company interest refinancing. And that's why the immediate near term is not up there. This is really about the back half. If that is what we see and where we are and if kind of like going back to Julian's question about having line of sight if that appears to be a sustainable trajectory, then that provides us the opportunity to potentially rebase the starting point for 5% to 7% growth. Nicholas Campanella Okay. No, that's helpful. And then just Georgia Power rate case, just wanted to make sure, are you guys still on track to kind of find that at the end of June or by July 1? And has anything kind of changed there in your rate case strategy? Chris Womack Nick, I think you said it very well as required by the '22 rate case order. We're working towards the filing this summer. So it would be that early July time frame. So everything is on track to do that. and to make sure we comply with that order, but you said it very well. Operator Jeremy Tonet, JPMorgan. Jeremy Tonet Maybe just kind of picking up on the last point there with regards to the Georgia Power rate case maybe build pressures and focus, I guess, nationwide. Just wondering any thoughts you could share there with levers that you could potentially pull to manage customer bills there? Is the potential to kind of move timing around rate changes to coincide with fuel cost recovery rolling off? Or just any other thoughts there? Chris Womack Once again, I mean I think you acknowledging all the factors and the variables and the puts and takes that will be on a consideration as we look at the filing. I mean, it's a little bit too early to say what the exact filing will look like. But yes, I mean, one of the things we think about is the pricing of these large load growth, how that can impact and help us with our focus on affordability, Yes, I mean, we do have the fuel case, fuel adjustment occurring that we can recognize next year in June of next year. So that's a factor to also be considered. We also have strong recovery related to Hurricane Alen that has to be dealt I mean, I think you've acknowledged a lot of the factors that will go into what this filing could look like, but it's just way too early to kind of speak to exactly what the nature of the filing, how it will come together. Jeremy Tonet Got it. No, that's helpful. And then just curious on your outlook for the IRA and any potential changes there, how that could impact Southern particularly as it relates to transferability, I guess, is in focus for the market. Just any thoughts in general from what you see or what you guys are thinking at this point? Daniel Tucker Yes, Jeremy, I'll hit transferability first and let Chris weigh on any kind of broader policy commentary. But on transferability, we just aren't that relying on it. We certainly take advantage of it where we can. And we've got a great program in place to monetize tax credits as efficiently and quickly as possible. But if for some reason, that was not available to us based on our current base plan, I mean, the impact to FFO to debt, let's say, is a basis point or two -- or I'm sorry, 10 to 20 basis points or so it's just not that meaningful. But it's important. And it's -- when it comes to projects that we're doing in the regulated space, it's good for customers to have that in place. It helps, obviously, monetize things and keep the balance sheet efficient. And that's good for we're certainly doing what we can to be a part of that conversation and to express the importance. Chris? Chris Womack No. I mean, as Dan talked to me, as a part of the conversation that Dan referred to me, we continue to engaged with policymakers in administration, but also as well as on Capitol Hill, expressing and explaining the value and the benefits of these credits and tax policy in terms of value goes directly to customers. And as we talk about affordability and our strategy there, making sure there's full recognition of understanding that the benefits of these credits go to record to our customers. And so we are -- I mean, we have no idea politically how this is going to play out with all the issues that are going on in Washington, but we continue to spend a lot of time making sure we're telling the story and helping people understand the value and benefits of these tax provisions. Operator Andrew Weisel, Scotiabank. Andrew Weisel I'm hoping to elaborate a little bit on the commentary on demand trends. Even after adjusting for the leap that each customer class a sequential slowdown. Data centers, in particular, still grew at a double-digit pace, but down from 17% last quarter to 11%. Can you talk about that a little bit? I realize the year ago, weather was atypical, certainly skewed the residential comps, but that shouldn't matter as much for C& you elaborate a little bit? Daniel Tucker Yes. I don't think there's anything to read into it, Jeremy. Again, if you adjust commercial and industrial, in particular, for that lead to effect just for the first quarter, again, these are just quarter numbers, not kind of 12 months ended numbers. It's almost a full 1%, so up 1.5% or so. The underlying stuff, like you mentioned data centers, look, you're doing growth year-over-year on an increasing ramp, right?And so you're not comparing to the same numbers as you were a quarter ago, you're comparing off a higher base a year ago. And so the numbers aren't going to necessarily align or continue to escalate in that fashion and total volume they continue to go things relative to our forecast, look, there are things that are just, again, timing related. There are some large industrial outages, not economy related, just kind of operational related. There was a delay in a steel manufacturer that was expected to come on in the first quarter that is baked into our numbers for the full year that's expected now in the next several months. And so from our seats, nothing in the first quarter results gives us any pause about any kind of systemic trends we're seeing in the economy or underlying customer base? Andrew Weisel Okay. That's good to hear. And then similarly, the large load pipeline. The slide say well over 50. Did I hear you right?Did you say 52 gigawatts now? I'm not sure if I maybe misheard you, but -- maybe if you could just give a little more detail there. How are you -- you're being very clear in the tone that activity remains robust. Maybe you can give a little more detail in the numbers. Daniel Tucker Yes. And I think the tone, Andrew, is what's more important than the numbers. I answered the question earlier, specific to the Georgia pipeline that we make filings on. So that's 52 gigawatts on its own. The the characterization we made in the prepared remarks is for the total consolidated pipeline across all three electric service we said over 50%. And it grew quarter-over-quarter. In fact, it was over 50% last quarter, it's over 50% this quarter, but it's a bigger over 50%.We're trying to be a little less precise about the total because, look, everyone has acknowledged that these pipelines includes some degree of double counting. They include some degree of speculative projects, and that's where it's really important to really focus on the way in a very measured way that we are only including and counting on and planning for a small fraction of these numbers. So we're trying not to get hung up too much on the big headline number and focus more on kind of the underlying tangible trends that we're seeing within that pipeline? Andrew Weisel Okay. As long as you're clarifying that they are, in fact, rising, that's reassuring. Operator David Arcaro, Morgan Stanley. David Arcaro I guess maybe on data center activity, I was just wondering if there had been any any changes following the modifications of the rate structure that you've now implemented in Georgia? Any feedback on that? Is that manageable for the industry to work with now in that state? Daniel Tucker Yes, Dave, this is Dan. It's just -- it's early days still. And so it's important to understand kind of the journey we've been on there. So very much earlier this year, we highlighted the rules, which the commission approved, which were very kind of high-level rules to be the basis of a framework. What has happened since then is there's been an actual more detailed framework that's been developed by the public utility staff working with the company to kind of what is essentially a tariff framework doesn't have a specific pricing in there, but it is a framework for doing just got finalized a couple of weeks ago. April 15, I think, was the date that it in terms of the details kind of being absorbed by and understood well by potential customers, that process is underway now. So it's a little early for reaction. Chris Womack But I do think some of the reaction we some feedback we've gotten. We talk a lot about orderly processes. This framework does provide another degree of order and certainty as we engage with these customers. And I think you've seen another state and others consider looking at deploying approving very similar rules and regulations. So we think to somewhat of a in a market that is evolving to bring this kind of certainty, really brings some discipline and puts us in a position, as we always say, to make sure as we engage with these customers, we want to provide benefits to all of our we think there's great value in these rules and regulations and this framework that's been approved by the commission. Daniel Tucker Yes. And David, as you heard me answer Andrew's question, I mean -- over the last three months, the pipeline has grown and the nature of these rules, while the details have not been out there, the nature of them has been for three months, and that growth has continued to occur. David Arcaro Yes. Yes. Got it. Okay. makes sense. Separately, I was curious, is there any feedback that you'd offer on what you're seeing in the RFPs that are underway there have been so many moving pieces around like tariffs, inflation, price increases for equipment. So I'm just wondering, are there any changes in the preference, like technology preference or strategy or the split among solar storage, natural gas as you're kind of executing against these RFP? Daniel Tucker Yes. And David, unfortunately, we can't speak to the RFP process. It's very intentionally done kind of by an independent evaluator, very confidentially a lot of trade secret information. So disclosing answering any of the questions you just asked, I think would be stepping outside the bounds of what we were allowed to do. David Arcaro Okay. Got it. We'll revisit as you get toward the end there, but I appreciate it. Yes. Daniel Tucker And I will just say, David, what's important about the RFP itself being the nature, it's all sourced, right? And so it does inherently have in it a multitude of technologies and options. So at the end of the day, given all the factors you've listed, that independent evaluator and the commission will have options to kind of address. Operator Durgesh Chopra, Evercore ISI. Durgesh Chopra You actually answered all my questions, but can I just ask a quick clarification question on the RFP? So I think there's some language in the slides on clarity by July. This is the George RFP. But then there's some -- also, I think, language in the release that you'll get more incremental data points throughout 2025? And then Dan, I think you said Q2 call, which is presumably sometime in July, we'll be able to get some more CapEx to are we going to get concrete data points from the RFP in July itself? Daniel Tucker So definitely, digested by the time of our Q2 call we will be able to speak to, we believe, incremental capital opportunities at least associated with that largest all-source RFP and maybe some degree of the other RFPs. And so that will kind of address most, I think, of the potential upside capital that we pointed to. Operator Shar Pourreza, Guggenheim Securities. It's actually Alex here on for Shar. Just on the impact from tariffs as we think about the growth opportunities at Southern Power. Sort of what's the exposure there? You could be looking at building contracted gas. And conversely, does the tariff and supply chain environment further conversations for contract renewals for the expiring tolling agreements? Daniel Tucker Yes. Look, Alex, I think the way to think about Southern Power is twofold. One, it's projects they already have underway. And when it comes to that, I think they're incredibly well positioned when it comes to this the solar facility they have under construction is in great shape from that perspective. It's far enough along and materials on the ground enough that there's very little exposure a wind repowering project underway. I also feel pretty good about how we're protected question really spoke to new contracted gas in the future. And that's a little bit the beauty of our business model at Southern Power. We don't go out and do speculative projects where we build something and then go get a contract. It's get a contract to make sure the risk mitigations are in place for that contract understand the environment rent from a cost perspective and then go execute. And so I feel confident that we'll have the ability to price in whatever the future holds in terms of cost to build new natural always some degree of risk, but that's where we're also incredibly measured from a contingency and contractual provision perspective. Great. And just a quick one, just a quick one on the upcoming GRC, just sort of how you're thinking about it. it's an election year, the PSC has been more vocal. Just any sense how we should be thinking about the ask or the rate impact you haven't filed yet or conversations happening ahead of silence? . Chris Womack Yes. Responding to an earlier question, I think it's too early to really say what the filing will look like. I mean there are a number of variables and puts and takes and issues that have to be dealt with. And yes, clearly is an issue that will be primary and at the forefront of this -- of our thinkings. But it's just, I think, simply too early to kind of say what all of that will look like.I mean we are ordered to file and we'll do that in early July. But I think it'd be it's a little bit premature to speak to kind of what the actual and what some of the exact provisions and considerations will look like at this time. Operator Travis Miller, Morningstar. Travis Miller Thank you. Hello, everyone. Two-part question here. As you go into the RFPs and any other generation contracting and look forward, how much is midstream becoming a constraint. And then you've also identified that to an extent as part of the upside CapEx that something a midstream gas investment or a midstream gas joint venture or something like that, a potential that we might see midyear as you update it? Daniel Tucker Yes, Trevor, this is Dan. I'll take that. Is gas supply, a focus for us as we look at these generation expansion plans, absolutely. But I think we're incredibly well positioned there. We're participating in a multitude of expansion projects in the Southeast as a procure of natural locking up, if you would, firm transportation and natural gas to serve our needs well into the future. So it's -- I think there is on a sufficient starting point for supply and great line of sight for incremental supply. When it comes to our own investments, none of that is greenfield brand-new pipeline opportunities. We already have 50% interest in the Southern Natural pipeline that kind of overlays our Southeast service territory that's our largest midstream investment, Kinder Morgan operates that on behalf of our partnership. And then we've got a couple of other much smaller ventures where we are not the operator and are a passive owner of those so these upside opportunities are largely associated with potential expansion projects of those pipelines, primarily brownfield, looping very, very little greenfield exposure and all in service territories that we know well. Chris Womack Dan, one thing I would add from a broader policy perspective, mean I was at a meeting conference last week with Secretary of Energy, Secretary of Interior, Secretary of Agriculture and EP administrator as well as some other industry and data center hyperscalers. And I mean, there's just broad consensus that to meet this growing demand is going to have to be more pipes being built as well as more transmission being built to make sure we have capacity and the resources to meet those growing needs. So yes, I mean that's part of our narrative and part of our conversation expressing support for additional permitting reform to make sure that we can, in a timely manner, meet this growing demand by building out the infrastructure in this country. Travis Miller Perfect. That's great. I appreciate all those details. Now that I know you were in the room with a lot of important people. I got a lot of other questions, but we'll do that other quick one on the dividend policy, anything that the Board is looking at? I know you've been on that $0.08 and even $0.07 for a long time increase. Anything in particular metric wise, that the Board would look to get off of that 7% or 8% increase? Daniel Tucker Yes. Look, I think from where we are today, it's a recognition that we've got a lot of financing to do and a big capital plan and a great source of equity is keeping the growth in a dividend more modest than not. And doing so should help us drive our payout ratio a little further south. I think once we are kind of in the low 60% range somewhere, which would kind of be the back end of our plan if we stay at this pace. That's the time to step back and reevaluate to those capital opportunities and equity needs persist out into the future?If so, it might remain modest. If not, the Board might have an opportunity to do something different. Operator And that will conclude today's question-and-answer session. Sir, are there any closing remarks? Chris Womack Yes, we thank you for your interest in Southern Company, and we look forward to speaking with you on our next call. Thank you very much. Have a great day. Operator Thank you, sir. Ladies and gentlemen, this concludes Southern Company's first-quarter 2025 earnings call. You may now disconnect. Sign in to access your portfolio
Reuters
01-05-2025
- Business
- Reuters
Southern Co beats first-quarter estimate on higher retail sales
May 1 (Reuters) - Power company Southern Co (SO.N), opens new tab beat Wall Street estimates for first-quarter profit on Thursday, helped by an increase in electricity retail sales and higher demand for power. Utilities across the U.S. are experiencing a surge in demand as the growing use of artificial intelligence is driving up the need for more power-guzzling data centers. The Reuters Power Up newsletter provides everything you need to know about the global energy industry. Sign up here. Along with data centers, electricity demand from residences and businesses for heating and transportation purposes has also gone up. The U.S. Energy Information Administration in February forecast power demand to hit record highs in 2025 and 2026. The company experienced a 4.2% increase in kilowatt-hour sales in the first quarter, led by residential, commercial and industrial customers. The power company noted a 11% rise in usage by existing data centers for the first quarter and said it had a large load pipeline of above 50 gigawatt, out of which 10 GW is committed and 6 GW is contracted. Quarterly total operating revenues rose 17% to $7.78 billion from a year earlier. However, interest expenses rose 7.3% to $714 million in the first quarter, while operating expenses increased to $5.8 billion from $4.9 billion a year ago. Southern Company is the second-largest utility company by customer base in the U.S., supplying power in six states – Alabama, Georgia, Illinois, Mississippi, Tennessee and Virginia. The Atlanta, Georgia-based company posted an adjusted profit of $1.23 per share for the three months ended March 31, compared with analysts' estimates of $1.20 per share, according to data compiled by LSEG.
Reuters
20-02-2025
- Business
- Reuters
Southern Co misses fourth-quarter profit estimates on higher interest costs
Feb 20 (Reuters) - U.S. utility Southern Co (SO.N), opens new tab narrowly missed Wall Street expectations for fourth-quarter profit on Thursday, hurt by higher operating costs and interest expenses. Shares of the company fell 1.1% in premarket trading. Interest rates in the U.S. have been elevated for more than two years, which has made it more expensive for utilities to invest in the construction and maintenance of critical infrastructure such as electrical grids. Southern Co's interest costs for the October-December quarter rose to $693 million from $634 million last year. Its total operating expenses rose 9% to $5.28 billion in the fourth quarter, with operating and maintenance costs climbing 14.6% to $1.99 billion. The utility company serves nearly 9 million customers across six states – Alabama, Georgia, Illinois, Mississippi, Tennessee and Virginia. The Atlanta, Georgia-based company's net income for the October-December quarter fell 37.5% to $534 million, or 49 cents per share. Southern Co posted an adjusted profit of 50 cents per share for the quarter, compared with analyst estimates of 51 cents per share, according to data compiled by LSEG.
