SOUTHERN CO (SO): what the price requires

The current priced-in claim for SOUTHERN CO (SO) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/SO

Headline

FieldValue
TickerSO
CompanySOUTHERN CO
Sector / IndustryUtilities
Current price$96.55/sh
CompositionTraditional Electric Operating Companies (Alabama/Georgia/Mississippi Power) 75% / Southern Power 8% / Southern Company Gas 17%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin today27.1%
Multiple paid22x operating income

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 6.2% cost of capital with 4% terminal growth over a 5-year stage.

Reconcile: at the x-ray's 9.3% required return this reads ~18.9%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.51σ
cohort percentile (of 70 peers)56
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.13x5expensive
Earnings2.28x2expensive
Relative1.18x3expensive
Growth1.33x3expensive

Families that justify the price: Relative Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.1%); the inversion above states its own rate.

Per-Model Detail (n=13)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$170.680.57xyesReference only (OCF-based, capex excluded): OCF $9.8B
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$83.061.16xyesP/E 20x (static sector reference · 2026-04), scenarios: 16.6x / 20.0x / 23.4x (bear / base = reference held flat / bull), EV/EBITDA 13x
Simple DDMGrowth——no—
Two-Stage DDMGrowth$27.293.54xyesStage 1: -10% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$41.822.31xyesBV/sh $35.38, ROE (TTM) 10.9%, ke 9.3%
Two-Stage Excess ReturnAsset$45.312.13xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$72.751.33xyesRev $30.2B, growth 9% (input: historical growth; tapered), Terminal P/S: 3.0x / 3.6x / 4.2x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$42.392.28xyesNormalized EBIT (5y avg op income, one-time charges added back) $5.96B × (1−15%) / WACC 9.1% → EPV (no growth)
Residual IncomeAsset$45.982.10xyesBV $35.38 + 5yr PV of (ROE (TTM) 10.9% − Kₑ 9.3%) × BV; BV grows 7.1%/yr
Graham NumberAsset$55.791.73xyes√(22.5 × EPS $3.91 × BVPS $35.38) — Graham's conservative floor
EV/EBITDA RelativeRelative$82.121.18xyesEBITDA $7.29B × sector EV/EBITDA 13.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$3.2829.44xyesEPS $3.91 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset$15.916.07xyesBV $35.38 × (ROIC 4.1% / WACC 9.1%)
P/Sales SectorRelative$66.881.44xyesRevenue $30.18B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$42.272.28xyesEPS $3.91 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$71.9b
Net debt / NOPAT (after-tax)10.03x
Net debt / operating income (pre-tax)8.57x
Share count CAGR (dilution)1.4%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

Southern Company is classified here as a growth stock, and that label, strange on a 120-year-old utility, is the whole thesis. Utilities grow when their service territory's demand grows, and Southern's territory is where the AI buildout physically plugs in: data centers consumed 42 percent more power in the first quarter of 2026 than a year earlier, total retail sales grew 2.3 percent in what the CFO called the strongest first-quarter growth in recent history, and operating revenues rose to $8.4 billion from $7.8 billion. For decades a percentage point of load growth was a good year in this industry. Southern signed roughly 2 gigawatts of additional large-load contracts in the first quarter alone, bringing contracted capacity above 11 gigawatts across 28 projects, with a pipeline of 23 gigawatts contracted or in late-stage development.

The regulated model converts that demand into a compounding machine. New load requires new generation and wires; the 10-K describes the investment program plainly, "investments to build new generation facilities to meet projected long-term demand requirements and to replace units being retired as part of the generation fleet transition" (accession 0000092122-26-000006), and regulated utilities earn an approved return on every prudent dollar of that rate base, with authorized returns like the 10.25 percent ROE cited for Atlanta Gas Light's infrastructure program in the same filing (accession 0000092122-26-000006). Georgia Power has 10 gigawatts of generation already under construction and just filed an All-Source RFP for 2 to 6 more gigawatts needed by 2033. Each gigawatt is future rate base, and each rate-base dollar is future regulated earnings.

Even the price analysis, run conservatively, leans friendly: at about 21 times operating income and a low utility-grade discount rate, the price sits below what even a sustained 5 percent annual decline in operating profit would warrant, which means the market is charging nothing for the growth inflection at all on that lens. The concessions are the sector's usual ones, $71.9 billion of net debt and a share count creeping up 1.4 percent a year to fund the buildout. But this is the rare utility where demand, regulation, and geography are all pulling the same direction at once, and the adjusted EPS of $1.32 in the first quarter is the early evidence.

Bear Case

Every dollar of Southern's earnings passes through a regulator's hands before it reaches a shareholder, and that is the sensitivity that governs this stock. The 10-K is explicit: "The Commissions set the rates Mississippi Power is permitted to charge customers", and for Alabama Power "there is a risk that the Commissions will not approve: (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts" invested (accession 0000092122-26-000006). The data center boom makes this politics sharper, not softer: residential customers and their elected commissioners will not quietly absorb grid costs incurred to serve hyperscalers, and every large-load contract Southern signs invites a rate-design fight about who pays for the new generation. The Georgia All-Source RFP process runs through 2027, which is two years of regulatory proceedings between the growth story and its approved economics.

The second macro lever is interest rates, and Southern carries more exposure than most: $71.9 billion of net debt, roughly ten times pre-tax operating income, against liquid assets of under $1 billion, with the share count growing 1.4 percent a year because the capital program outruns internal cash generation. A utility is a bond with a construction budget; when financing costs rise, the spread between authorized returns and the cost of the money that earns them compresses, and commissions historically lag in repricing. Construction itself is the third risk, and this company's record there needs no embellishment: multi-gigawatt buildouts in this industry have a long history of budget and schedule overruns, and Southern is now committing to one of the largest capacity expansions in its history simultaneously across states.

The valuation offers less shelter than the growth narrative suggests. Only the peer-multiple family reaches the price, and it sits in the upper half of the utility peer range; the asset-value and earnings-power reads land at roughly half the quote, and even the growth-based methods sit about 25 percent below it. One denominator note: EDGAR's trailing operating income reads $7.3 billion while the record basis prices $8.4 billion, different measurement bases, both stated. A buyer at $95.61 is paying a premium utility multiple for load growth whose economics are not yet approved, funded by debt and equity issuance, in a rate environment where the regulator, not management, decides the margin. If data center demand slows, or if commissions shift costs toward shareholders to shield ratepayers, the stock re-rates toward the utility median while the capex commitments stay.

Valuation

The price analysis lands in an odd, informative place for a utility. At $95.61 (July 10, 2026), Southern trades at about 21 times operating income on the record basis, and inverted at a 6.2 percent cost of capital, the price sits below what even a 5 percent annual operating-profit decline would warrant; that is a bound, not a solved growth path, and it says the demanding-looking multiple is arithmetically defensible even under decline, once utility-grade discount rates apply. At the same time, the multiple sits in the upper half of the utility peer range, so relative to its sector the market is already paying up. Both facts fit one story: the sector has re-rated on data center load growth, and Southern is priced as one of its leaders.

The families split along that seam. Peer multiples reach the price, landing about 15 percent below the quote at their central read; the growth-based methods sit roughly 25 percent below; and the asset-value and earnings-power reads sit at about half, which is typical for regulated utilities whose asset returns are capped by commissions. The filing-sourced economics beneath the growth thesis: an investment program to "build new generation facilities to meet projected long-term demand requirements" (accession 0000092122-26-000006), authorized returns exemplified by the 10.25 percent ROE on Atlanta Gas Light's infrastructure program (accession 0000092122-26-000006), and first-quarter operating revenues of $8.4 billion, up from $7.8 billion, with adjusted EPS of $1.32. The 11-plus gigawatts of contracted large load across 28 projects is the order book those returns will be earned on.

Solvency reads as utility-normal but worth stating: $71.9 billion of net debt at roughly ten times pre-tax operating income (EDGAR's trailing tally is $7.3 billion versus $8.4 billion on the record basis; both labeled), thin corporate liquidity, and 1.4 percent annual share growth funding the buildout. Leverage like this is the regulated model working as designed, recoverable through rates if commissions cooperate. The decisive variable is therefore not demand, which is contracted, but regulatory conversion: whether the Georgia RFP process and the various state proceedings through 2027 turn contracted gigawatts into approved rate base at healthy authorized returns.

Catalysts

The first-quarter 2026 report established the demand inflection: operating revenues of $8.4 billion rose from $7.8 billion a year earlier, adjusted EPS reached $1.32, total retail electricity sales grew 2.3 percent (the strongest first quarter in recent history per CFO David Poroch), and data center usage jumped 42 percent year over year, lifting weather-adjusted commercial-class sales 4.5 percent. The contracting pipeline moved with it: roughly 2 gigawatts of new large-load contracts signed in the quarter brought the contracted total above 11 gigawatts across 28 projects, with 23 gigawatts contracted or in late-stage development.

The regulatory calendar is the main forward machinery. Georgia Power filed an All-Source Request for Proposal for 2 to 6 gigawatts of new generation needed by 2033, incremental to the 10 gigawatts already under construction, with the process expected to run through 2027. Each stage of that proceeding, alongside rate cases and cost-recovery filings across Alabama, Georgia and Mississippi, converts contracted demand into approved returns, and each is a date where the economics can improve or erode.

The next earnings report, expected in late July 2026, carries three reads: whether the large-load contract count keeps climbing, whether data center usage growth sustains anything near the first quarter's pace, and financing costs on the capital program given the debt-heavy balance sheet and ongoing equity issuance. Southern's story is unusually legible for a utility: the demand is contracted and public; what remains uncertain, and what each catalyst resolves a piece of, is who pays for the buildout and at what authorized return.

Peer Cohorts (Per Segment, With Filing Citations)

Traditional Electric Operating Companies (Alabama/Georgia/Mississippi Power) (reported)

Southern Power (reported)

Southern Company Gas (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 results and Utility Dive, May 2026 · Q1 2026 earnings call, May 2026 · Q1 2026 earnings call and Utility Dive, May 2026 · Q1 2026 results presentation, May 2026 · Q1 2026 results, May 2026 · Q1 2026 results, StockTitan and Utility Dive, May 2026 · Q1 2026 results presentation via Investing.com, May 2026

View the full interactive SO report on boothcheck