Guggenheim Upgrades Southern Co. (SO) to Buy

Guggenheim analyst Shahriar Pourreza upgraded Southern Co. (NYSE: SO) from Neutral to Buy with a price target of $72.00 (from $63.00).

The analyst commented, "We are upgrading SO to BUY from NEUTRAL based on our view that Unit 3 HFT and clarity into the ongoing NRC special investigation represent key NT clearing events. We believe that investors should increasingly value SO on a post-Vogtle in-service basis, and see current levels as providing an attractive entry point ahead of EEI and a catalyst-rich 2022. Our revised thesis is grounded in our latest separate C-suite meetings with CEO and CFO, which have instilled increased confidence on both the NT clearing events (NRC review, opportunities in the prudency process, construction progress) and the LT earnings profile, including a clear line of sight to the 2024 goalposts and potential upside therein. Heading into the fall, we see SO positioned for not only multiple expansion, as Vogtle advances, but also longer-term earnings upside, with some $5bn in incremental capex opportunities identified by management in our recent meetings, with minimal equity needs and little bill inflation. Why now? We believe the rerating in shares will move in step function with each data point over the coming quarters, with large project risk fading away to once again reveal a solid company with strong rate base growth prospects and excellent regulatory relationships coupled with capital growth opportunities that will, in time, prove out upside to consensus estimates – see our EPS accretion and cash flow trajectory math in the note. We believe a return to bread and butter utility basics post-Vogtle should drive SO’s valuation back to in-line with peers, while future capex plans could provide the rate base growth visibility to warrant even more. Our PT moves to $72 from $63."

For an analyst ratings summary and ratings history on Southern Co. click here. For more ratings news on Southern Co. click here.

Shares of Southern Co. closed at $66.27 yesterday.

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