Southern Company Risk Looks Overdone as Policy Fears Fade

Mizuho is pushing back on what it sees as an overstated threat to Southern Company (NYSE:SO | SO Price Prediction), maintaining its Outperform rating after conversations with parties in Alabama suggested the state’s competing utility legislation is unlikely to produce meaningful regulatory damage.

Alabama bills SB 360 and HB 475 have raised concerns about the regulatory framework governing Southern Company’s Alabama Power subsidiary. The worry, broadly, is that new legislation could constrain the utility’s ability to earn adequate returns in one of its core markets. Mizuho disagrees with that read.

After speaking with parties in Alabama, Mizuho expects the two bills to converge into a single bill, with only six days left in the legislative session. Critically, the firm expects the return on equity cap proposed in HB 475 to be excluded from the final bill — the provision that had generated the most investor anxiety. The exclusion of an ROE cap means the resulting legislation would represent a significantly watered-down version of what the market initially feared.

Alabama Power’s Contribution to the Bigger Picture

Alabama Power is a meaningful piece of Southern Company’s earnings profile. Alabama Power generated $1.937 billion in revenue during Q4 2025, up 10.6% year-over-year, continuing a consistent growth trend across all four quarters of 2025. That momentum matters: any structural cap on returns in Alabama would directly weigh on the segment’s long-term earnings power and complicate Southern Company’s capital recovery story.

The broader company delivered a solid full-year 2025, with revenue of $29.553 billion, up 10.59% year-over-year, and full-year adjusted EPS of $4.30, essentially in line with estimates. CEO Chris Womack framed the year confidently: “2025 was another outstanding year for Southern Company, and it was also a transformative one. Southern Company is meeting the growing demand responsibly, while continuing to deliver value and benefits to all of our customers.”

Stock Context and Valuation

Southern Company shares have held up well amid the legislative noise. The stock is up 9.76% year-to-date, trading around $95.69. That outperformance reflects investor confidence in the company’s data center demand thesis and its regulated revenue model, even as sector headwinds from rising interest rates persist.

The stock trades at a forward P/E of 20.83 and carries a dividend yield of 3.09%, with the quarterly payout recently raised to 74 cents per share. The broader analyst consensus sits at “Hold” with a mean price target of $101.24, making Mizuho’s Outperform stance a differentiated call.

Investors should watch for the Alabama session to conclude and monitor whether the final bill reflects the stripped-down version Mizuho anticipates. Q1 2026 earnings, scheduled for April 30, 2026, will provide the next formal opportunity for management to address the regulatory landscape directly.