Mizuho raises Southern Co. stock price target to $90 from $85

On Friday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Southern Co . (NYSE:SO) shares, increasing the price target to $90 from the previous $85, while maintaining a Neutral rating on the stock. The company, currently trading at $87.82 with a market cap of $96.4 billion, has demonstrated strong momentum with a 34% return over the past year. According to InvestingPro analysis, Southern Co. appears to be trading above its Fair Value, with a P/E ratio of 20.5x. The adjustment came in response to Southern Co.’s recent announcement during its fourth-quarter 2024 earnings call, where the company unveiled its capital investment plan for the years 2025 to 2029.

The new capital expenditure plan outlined by Southern Co. is set at $62.8 billion, marking an approximate 30% increase over the prior 2024-2028 plan. This escalation in capital investment is projected to spur the company’s rate base growth to 7%, a step up from the 6% growth anticipated previously. InvestingPro data reveals the company maintains strong financial health with a "GOOD" overall score, supporting its ambitious investment plans. Notably, Southern Co. has maintained dividend payments for 55 consecutive years, with 23 years of consecutive increases. Southern Co. also highlighted a potential additional upside of $10 billion to $15 billion, which, if realized, could push the rate base growth even higher, reaching up to 8%.

Southern Co. reiterated its expectation to achieve an earnings per share (EPS) growth rate of 5-7% using the midpoint of its 2024 guidance, which stands at $4.00. The company also indicated that there could be an opportunity to recalibrate at a higher starting point in 2027 if the incremental opportunities materialize as forecasted. Furthermore, the updated plan anticipates an 8% annual growth in sales, an improvement from the previously estimated 6%.

Despite the positive developments in Southern Co.’s investment strategy and growth projections, Mizuho’s analyst believes that the current share price already reflects these advancements. The stock is trading at a 16% price-to-earnings (P/E) premium compared to its peers. The raised price target of $90 aligns with the current market multiples and reflects Mizuho’s stance that the stock is fairly valued at its current level. For deeper insights into Southern Co.’s valuation and access to comprehensive financial analysis, including additional ProTips and detailed metrics, investors can explore the full research report available on InvestingPro.

In other recent news, Southern Company reported its fourth-quarter 2024 earnings, which fell short of analyst expectations. The utility company’s adjusted earnings per share came in at $0.50, missing the analyst estimate of $0.53 by $0.03. Despite this, Southern Co’s revenue for the quarter reached $6.34 billion, slightly exceeding the consensus estimate of $6.31 billion and marking a 4.9% increase from the same quarter last year. For the full year 2024, the company reported operating revenues totaling $26.7 billion, up 5.8% from $25.3 billion in 2023. Fourth-quarter earnings were reported at $534 million, or $0.49 per share, compared to $855 million, or $0.78 per share, in the previous year. Adjusted earnings for the quarter were $544 million, or $0.50 per share, down from $700 million, or $0.64 per share, in the same period last year. For the full year, Southern Co reported earnings of $4.4 billion, or $4.02 per share, an increase from $4.0 billion, or $3.64 per share, in 2023. Adjusted earnings for 2024 were $4.4 billion, or $4.05 per share, compared to $4.0 billion, or $3.65 per share, in the previous year. The company attributed its full-year earnings growth to higher utility revenues, despite facing increased expenses in several areas.

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