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On Tuesday, JPMorgan upgraded Southern Co (NYSE:SO) stock from Underweight to Neutral and raised the price target to $94 from $91. The shift in rating comes as JPMorgan analysts recognize the need for defensive equity positions amidst increased recession risks, which they now place at 60% due to the impact of new trade policies. With a beta of 0.37 and a market capitalization of $95.7 billion, Southern Co demonstrates strong defensive characteristics that InvestingPro data confirms.
Southern Co's attractive regulatory environment, except for the pending rate case, and the robust economic strength of its service territories were cited as key factors for the upgrade. The company's size, scale, and balance sheet strength also contribute to its appeal as a blue-chip defensive stock during market volatility. InvestingPro data reveals the company has maintained dividend payments for 55 consecutive years and currently offers a 3.3% dividend yield, with 23 years of consecutive dividend increases.
Additionally, the Georgia Public Service Commission (PSC) and other stakeholders are seen as strong supporters of economic development in the region, including the growth of data centers. An analysis of the Southeastern Electric Reliability Council (SERC) Excess Capacity further indicates a positive outlook for Southern Co. According to InvestingPro, the company maintains a "GOOD" overall financial health score, with three analysts recently revising earnings estimates upward for the upcoming period.
Despite these positives, JPMorgan analysts remain cautious due to the regulatory uncertainties surrounding the Georgia Power rate case, which could affect rates. They believe that Southern Co's defensive characteristics and historical performance during recessions position it well for turbulent times but are waiting for a clearer outcome of the rate case before adopting a more optimistic stance. The company's P/E ratio of 21.7 suggests it's trading at a premium relative to near-term earnings growth potential.
In other recent news, Southern Company has announced significant developments that are of interest to investors. The company has entered into an agreement to issue $1.8 billion in junior subordinated notes with a 6.375% fixed-to-fixed reset rate due in 2055, as per a recent SEC filing. This move is intended to support general corporate purposes, such as infrastructure investment and debt repayment. Additionally, Southern Company has appointed Walt Farrell as the new CEO of Atlanta Gas Light and Chattanooga Gas, effective March 31, highlighting a strategic leadership change aimed at addressing growing energy demands in the region.
In terms of stock evaluations, BofA Securities has raised Southern Company's price target from $93 to $96, maintaining a neutral rating. The adjustment reflects updated price-to-earnings multiples and the company's strong operational track record. Similarly, Mizuho (NYSE:MFG) Securities has increased its price target from $85 to $90, also maintaining a neutral stance. This adjustment follows Southern Company's announcement of a $62.8 billion capital investment plan for 2025 to 2029, which is expected to boost rate base growth.
Furthermore, Southern Company has elected James O. Etheredge as an independent director to its Board of Directors, effective April 1, 2025. Etheredge brings extensive experience from his tenure at Accenture (NYSE:ACN), aligning with the company's goals of leadership and innovation. These recent developments underscore Southern Company's ongoing efforts to enhance its operational and strategic initiatives.
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