Should You Invest in the Southern Company?

PHOTO CREDIT: Southern Company

OVERVIEW

The Southern Company is a corporation based in the United States. The company specializes in the creation and distribution of energy like electricity and gas to households and businesses in contracted areas. The company operates thousands of miles of electrical and gas lines from its production plants and storage facilities to customers. The company was founded in 1945.

Why You Should?

1. The Southern Company is a recession-proof and safe investment. The company reports stable financial results during times of economic recession, something which other companies simply can not do due to the nature of the products and services that they offer. Historically, utilities have a stable stock price which tends to slowly grow.
2. The Southern Company is a great reopening play as more electricity and gas is used by customers as the economy starts to reopen. For example, once restraints and sporting events start to reopen for normal operations after this pandemic, this will cause an increase in demand for electricity and gas. This will benefit both the company and its investors.
3. The Southern Company serves over 8 million customers in Georgia, Tennessee, Virginia, and Illinois. This wide range of operations and serving this number of customers will help the company grow in the future as they will have a constant flow of revenue and profits from these customers.
4. The Southern Company has been investing in the future of energy production. They have been developing and building nuclear power plants and other clean energy facilities to transition from older sources of energy such as fossil fuels. This will benefit the company in the future and will also benefit investors.

Why You Should Not?

1. Though The Southern Company contracts with cities and areas to provide their services, these contracts can be taken up by other companies as well. Some of these companies include Duke Energy, Consolidated Edison, NextEra Energy, as well as some other private and public entities. . This competition might hurt the company in the future.
2. The COVID-19 Pandemic has reduced the demand for energy from large commercial and enterprise customers, like restaurants, schools, and stadiums. These locations will open after this pandemic is over, but it has still negatively impacted the company’s financial results. The company looks for these impacts to be short to mid-term.
3. The Southern Company has seen falling revenues due to the selling of its Gulf assets. However, during this same time, the company has seen rising profits as the assets that they sold were not as efficient as the other ones that they have. The company looks for revenues to be growing after the impacts of the pandemic and the selling of assets. This might hurt investors in the short to mid-term. In the financial year of 2019, the company reported revenues of around 21.4 billion and profits of around 4.74 billion. In the financial year of 2018, the company reported higher revenues of around 23.5 billion and profits of around 2.23 billion.

PHOTO CREDIT: Yahoo Finance

MY OPINION

In my opinion, I think that The Southern Company is a good long-term investment due to the resilience in its business, a good reopening play, a wide range of operations, and heavily investing in the future of energy production and distribution. However, competition, impacts from the COVID-19 Pandemic, and falling revenues might hurt the company.