Southern Company heads above this year's range, with a hot summer doing much of the work

Southern Company said its adjusted earnings for this year should come to about $4.70 a share, above the $4.50 to $4.60 range it set in February. That total adds results for the first nine months to management's estimate for the fourth quarter. For a regulated utility, a year like this matters mostly for what it lets the company build on, and management now says it will raise the top of its ranges for the next two years. How far that should go depends on how much of this year's excess came from a hot summer and how much from customers who have signed long contracts.

The September 2026 quarter did most of the lifting. Adjusted earnings per share came in 29 cents above the estimate the company gave in July, when it said the year would land near or at the top of its range. The release splits the year-on-year gain of 34 cents into its parts, and weather, at 15 cents, is the second-largest piece after a line the release calls retail revenue impacts, at 21 cents; weather alone was close to half the increase on the release's own figures. Chief executive Christopher Womack described the quarter as one of the warmest the company's service territory had seen in half a century.

The rest of the gain leans less on the thermometer. Retail revenue impacts and higher sales volumes together added more than weather did, while interest, operating costs and a larger share count each took back part of the gain. Sales to commercial customers, the class that includes data centers, grew 7.3% after adjusting for weather, which is the kind of growth a mild summer would not erase.

The fourth-quarter estimate is where the summer is partly handed back. The company expects 30 cents a share, against 54 cents in the same quarter last year, a figure calculated from its reported full-year and nine-month results. The result is that a 29-cent beat in the third quarter becomes a full year only 10 cents above the top of the original range. Asked whether Southern was bringing maintenance spending into the quarter while profits were strong, chief financial officer David Poroch said the company had been doing that sort of work all year to strengthen its position for later years. The July estimate for the third quarter also proved cautious.

That matters for next year. In February Southern set next year's range at $4.85 to $4.95, as one step in a plan for faster annual growth. Measured from this year's expected result, that range would mean growth of only 3.2% to 5.3%, calculated from the company's own figures. Poroch said the company now expects to raise the upper end of the ranges for the next two years, giving its longer-term growth path a higher starting point, with numbers to come alongside fourth-quarter results. Womack's prepared wording was more guarded, describing an opportunity to "potentially raise the upper end of our near-term guidance ranges".

What would justify a higher base is the load Southern has signed up. Its contracts with large customers such as data centers now total 21 gigawatts, more than twice the level reported in February. Poroch said those contracts carry fixed minimum bills that cover at least the full cost the company adds to serve them, so the company recovers those costs whether or not the customers ramp up on schedule. Womack conceded that the much larger pipeline of prospects will not all turn into contracts.

Serving that load costs capital, and some of the capital comes from new shares. New projects add about $4 billion to the base investment plan set in February, and the company now puts its remaining equity need through the end of the decade at about $2 billion, up from the figure it gave in July. The dilution already shows in the third quarter's bridge. The fourth-quarter results will show how much of this year's result the company is prepared to build on, and the summer's weather gain is the part a cooler year would take away.