On Wednesday, Argus Research increased its price target for Southern Co . (NYSE: NYSE:SO) shares to $90, up from the previous target of $75, while maintaining a Buy rating on the utility company's stock. The firm's decision comes after Southern Co., one of the largest U.S. utilities, successfully brought online its two new Vogtle nuclear-generating plants, with Vogtle 3 starting operations in July 2023 and Vogtle 4 reaching full operational status last month.
Southern Co. has overcome the challenges of delays and cost overruns during the construction of the Vogtle plants. The analyst from Argus Research anticipates that the utility will see earnings benefits from the reduction in and potential credit for the construction losses incurred during the Vogtle projects. Furthermore, the lower operating costs associated with the new nuclear plants are expected to contribute to the company's financial performance.
The company, which derives approximately 65% of its revenues from retail electric sales, has been transitioning away from coal-fired plants and increasing its use of renewable energy sources. This shift is likely to result in favorable regulatory rates and cost recoveries. Argus Research suggests that Southern Co.'s growth platform is robust and management is targeting above-average growth.
Southern Co.'s consistent dividend growth, with typical annual increases of around 3%, alongside the new operational efficiencies, positions it as a potentially attractive option for income investors. The firm also anticipates that Southern Co. shares will benefit from a favorable sector rotation as interest rates decrease.
InvestingPro Insights
As Southern Co. (NYSE: SO) garners a positive outlook from Argus Research, current InvestingPro data and tips further illuminate the company's financial landscape. With a market capitalization of $86.06 billion and a stable P/E ratio of 20.39, Southern Co. stands as a significant player in the utilities sector.
Notably, the company's commitment to dividend growth is evident, as it has increased its dividend for 54 consecutive years, a testament to its financial reliability and a compelling factor for income-focused investors. This dedication to shareholder returns is further underscored by a dividend yield of 3.66%, coupled with a recent dividend growth of 5.88%.
InvestingPro Tips highlight that Southern Co. is trading at a low P/E ratio relative to near-term earnings growth, suggesting a potentially undervalued stock in the context of its future earnings potential. Moreover, the stock is trading near its 52-week high, with a price 99.47% of the peak, reflecting strong market confidence. Analysts have revised their earnings upwards for the upcoming period, which could signal further positive momentum.
For investors seeking additional insights, there are more InvestingPro Tips available at https://www.investing.com/pro/SO. Using the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable tips, with a total of 9 additional tips listed on InvestingPro for Southern Co.
Overall, Southern Co.'s financial health and strategic growth initiatives, as reflected in the latest data and analyst perspectives, present a compelling case for both growth and income investors.
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