QS Research · Michael Burry's Scion Capital analyst template · 2006
SOUTHERN CO (SO)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction low · base case -41% · downside -49% · upside +14%
At $92.34 the market is capitalizing TTM to 2026-03-31 EBITDA of $13.49B at 13.1x (N1, N13, N25), but the FY2020-FY2025 normalized EBITDA is $10.39B (S2); at the same 13.1x that is $136.1B EV less $74.3B net debt = $61.8B equity, or about $55/share, -41%. The newest Q3 2026 print is genuinely better (adjusted EPS $1.94, 2026 adjusted EPS guidance $4.70, 21 GW signed large load; S7, S98), but it strips out $118M accelerated depreciation, $43M debt extinguishment and $9M Nicor losses, and the growth is funded with negative TTM FCF of -$3.47B (N17) and a rising share count (N5). Even at the highest peer 18.6x on normalized EBITDA the value is only about $105.5, +14%, so the risk/reward is short, not long. This is a normalization call: using the tighter FY2023-FY2025 average EBITDA of about $12.16B would give about $85/share at 13.1x, still below today (S2).
Key numbers
- Share price: $92.34
- Market cap: $104.09B
- Latest financial period: TTM to Mar 31, 2026
- Revenue (TTM): $30.18B
- EV / EBITDA (TTM): 13.1x
- P/E (TTM): 23.9x
- Price / book: 2.89x
The 15 boxes
- ✓ 1. Long-form business notes
Southern is a holding company whose revenue comes from three regulated vertically integrated electric utilities (Alabama Power, Georgia Power, Mississippi Power), competitive wholesale generator Southern Power, and gas distribution through Southern Company Gas. The latest FY2025 10-K dated 2026-02-19 shows FY2025 revenue of $29.55B, operating income of $7.29B, operating cash flow of $9.80B, and capex of $12.74B. Revenue rose from $20.38B in FY2020 to $29.55B in FY2025 but fell -14% from FY2022 to FY2023, so cycle-normalized earnings and cash flow matter; latest growth is data-center/large-load contracts and a $15.9B 2026 construction program. The sources provide no Q1 2026 or TTM figures, so TTM cannot be shown beside normalized FY2020-FY2025 figures.
- ✓ 2. Competitive advantage
SO's advantage is a legal franchise, not a brand or a cost edge: Georgia's Territorial Electric Service Act of 1973 gives assigned service territory (one narrow 900 kW one-time opt-out) and Southern Company Gas holds exclusive gas franchise territories, while Mississippi power is protected by Grandfather Certificates. The numbers fit a regulated monopoly rather than a pricing-power business: FY2025 operating income was $7.29B on $29.55B revenue (24.7% operating margin, computed), versus a FY2021 trough of $3.70B on $23.11B (16.0%), and the six-year average was about $5.69B. But the return is set by regulators, not by competitive strength, and FY2025 capex of $12.74B exceeded operating cash flow of $9.80B, so the franchise consumes capital rather than throwing off excess. Competition is real at the edges: Southern Power competes with IPPs and investor-owned utilities in wholesale, and retail territories face self-generation and distributed generation.
- ✓ 3. 10-Q takeaways
The 10-Q for the quarter ended 2026-09-30 shows acceleration, not the cyclical decline in the FY2022-FY2023 history: Q3 2026 consolidated net income was $2.0 billion ($1.77/share) versus $1.7 billion ($1.55) in Q3 2025, and YTD 2026 was $4.6 billion ($4.02) versus $3.9 billion ($3.56). Q3 2026 retail electric revenues rose to $6.6 billion from $5.7 billion, with weather-adjusted commercial KWH sales up 7.3% on data centers at Georgia Power, but other O&M rose 12.5% to $1.8 billion and taxes other than income taxes jumped 50.7% to $434 million, largely property-tax timing. Earnings quality needs care: part of the equity-method gain ($46 million in Q3, $115 million YTD at Southern Holdings) is venture-capital investment gains, and YTD depreciation carries $228 million of accelerated wind-repowering charges. Regulatory headwinds are the main new item: Alabama base rates frozen by statute to 2029 and Georgia agreeing to at least $949 million a year of downward rate pressure for 2029-2031.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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