{"id":4471,"date":"2013-07-03T11:22:00","date_gmt":"2013-07-03T15:22:00","guid":{"rendered":"http:\/\/www.l-a-k-e.org\/blog\/?p=4471"},"modified":"2013-07-03T11:27:36","modified_gmt":"2013-07-03T15:27:36","slug":"southern-company-downgraded-because-of-coal-and-nukes-two-analysts","status":"publish","type":"post","link":"http:\/\/www.l-a-k-e.org\/blog\/2013\/07\/southern-company-downgraded-because-of-coal-and-nukes-two-analysts.html","title":{"rendered":"Southern Company downgraded because of coal and nukes –two analysts"},"content":{"rendered":"

\r\nIt’s not like they weren’t warned,\r\n\r\nabout coal<\/a>\r\n\r\n<\/a>\r\nand\r\n\r\nabout nukes<\/a>.\r\nIt’s not Standard & Poor’s<\/a> this time,\r\nbut that could happen soon, too.\r\nSO’s biggest part, Georgia Power, is neck-deep in nukes,\r\nas\r\n\r\nEdison Electric Institute’s warning<\/a>\r\nabout\r\n\r\nthe disruptive challenge of distributed solar<\/a>\r\nstarts to affect its parent’s stock price.\r\n<\/p>\r\n

\r\nZacks.com wrote 21 June 2013,\r\n\r\nSouthern Company Slips to Sell – Analyst Blog<\/a>\r\n<\/p>\r\n

\r\n

\r\nOn Jun 20, Zacks Investment Research downgraded electric utility\r\nfirm, Southern Company ( SO ), to a Zacks Rank #4 (Sell).\r\n<\/p>\r\n

\r\nWhy the Downgrade?\r\n<\/H3>\r\nSouthern Company witnessed sharp downward estimate revisions after\r\nreporting weak first-quarter 2013 results. On Apr 24, 2013, Southern\r\nCompany reported first-quarter 2013 earnings per share (excluding\r\ncertain one-time charges) of 49 cents, below the Zacks Consensus\r\nEstimate of 51 cents. The weaker-than-expected results could be\r\nattributed to spiraling expenses.\r\n

\r\nMoreover, Southern Company’s total operating expense for the first\r\nquarter of 2013 stood at $3,572.0 million, approximately 25.9%\r\nhigher than the prior-year level.\r\n<\/p>\r\n

\r\nAdditionally, Southern Company’s heavy reliance on coal-generated\r\nenergy supply and a lack of meaningful contribution from renewable\r\nenergy is a matter of concern. In the current age of growing\r\nemphasis on ‘environment friendly or green’ energy, the company may\r\nbe forced to divert cash flow to ensure regulatory compliance, which\r\ncan adversely impact profitability.\r\n<\/p>\r\n

\r\nWe also remain skeptical regarding Southern Company’s $14 billion\r\ninvestment for the construction of two new reactors at the company’s\r\nexisting nuclear site in Vogtle, Georgia. With a fair chance of cost\r\noverruns and likely modifications—to fully address the safety\r\nrisks exposed by the meltdown at Japan’s Fukushima plant last year\r\nfollowing a devastating earthquake and tsunami—the project\r\ncost could easily end up around $20 billion. This will substantially\r\nincrease Southern Company’s leverage and deteriorate its credit\r\nmetrics.\r\n<\/p>\r\n<\/blockquote>\r\n\r\n\"Southern<\/a>\r\n

\r\nMichael Flannelly wrote for The Dividend Daily 14 June 2013,\r\n\r\nJefferies Downgrades Southern Company to \u201cHold\u201d (SO)<\/a>,\r\n<\/p>\r\n

\r\n

\r\nJefferies analyst Paul Fremont commented, “With the current\r\ninvestor focus over lower ROEs and cost over-runs at the Kemper\r\nCounty IGCC plant, Jefferies believes that the stock will continue\r\nto trade at a group average P\/E multiple versus its historical 5-15%\r\npremium. Our upgrade was predicated on trading SO at a premium\r\nmultiple, so we have revised our price target to reflect our updated\r\nviews and believe the stock is fair value at current levels.”\r\n<\/p>\r\n<\/blockquote>\r\n

\r\nSO’s price when Flannelly wrote that was $44.65 and Jefferies set\r\na target of $46, or projected upside of about 3%.\r\nSO is $43.33 as I write, which is down about 3%, or almost 6% from\r\nJefferies’ target.\r\n<\/p>\r\n

\r\nGeorgia Power and SO can\r\nkeep dragging their feet on solar and wind\r\n\r\nlike the telcos did about packet switching<\/a>\r\nand be outflanked by upstarts like SolarCity (SCTY).\r\nOr they can\r\n\r\nget on with what Georgia Trend just noted everybody wants them to do<\/a>.\r\n<\/p>\r\n

\r\n -jsq\r\n<\/p>\r\n

\r\nDisclosure: I own both SO and SCTY, as I mentioned to SO CEO Tom Fanning\r\nback at the May stockholder meeting (when SO price was $46),\r\nalthough not for the entire period since then.\r\n<\/p>","protected":false},"excerpt":{"rendered":"It’s not like they weren’t warned, about coal and about nukes. It’s not Standard & Poor’s this time, but that could happen soon, too. SO’s biggest part, Georgia Power, is neck-deep in nukes, as Edison Electric Institute’s warning about the disruptive challenge of distributed solar starts to affect its parent’s stock price. Zacks.com wrote 21 […]","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_links_to":"","_links_to_target":""},"categories":[216,14,18,104,23,24,36],"tags":[6561,8753,6560,8704,6140,8701,8708,2283,6564,171,6566,8702,12,8737,6565,6327,107,29,8713,6304,6562,1523,8714,6563,108,2532,6339,8716,6559],"class_list":["post-4471","post","type-post","status-publish","format-standard","hentry","category-coal","category-economy","category-georgia-power","category-nuclear","category-renewable-energy","category-solar","category-wind","tag-analyst","tag-coal","tag-downgrade","tag-economy","tag-edison-electric-institute","tag-georgia","tag-georgia-power","tag-georgia-trend","tag-jefferies","tag-kemper-coal","tag-kemper-igcc","tag-lake","tag-lowndes-area-knowledge-exchange","tag-nuclear","tag-plant-kemper","tag-plant-ratcliffe","tag-plant-vogtle","tag-price","tag-renewable-energy","tag-scty","tag-sell","tag-so","tag-solar","tag-solar-city","tag-southern-company","tag-stock","tag-tom-fanning","tag-wind","tag-zachs"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p585fK-1a7","jetpack_sharing_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/posts\/4471","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/comments?post=4471"}],"version-history":[{"count":2,"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/posts\/4471\/revisions"}],"predecessor-version":[{"id":4473,"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/posts\/4471\/revisions\/4473"}],"wp:attachment":[{"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/media?parent=4471"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/categories?post=4471"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.l-a-k-e.org\/blog\/wp-json\/wp\/v2\/tags?post=4471"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}