Will Nicor's Partial Rate Hike Approval Shift Southern's (SO) Regulatory and Earnings Outlook?

• In November 2025, Southern Company's subsidiary Nicor received approval from the Illinois Commerce Commission for about half of its requested rate increase, which will affect earnings by an estimated 2 cents per share beginning in 2026.
• This partial approval, combined with increased regulatory scrutiny over gas capital expenditures and line extensions, presents a manageable yet tangible challenge to Southern Company's projected financial outlook.
• We will explore how the Illinois regulator’s cautious stance on Nicor’s rate hike shapes Southern’s broader investment story around earnings and regulatory headwinds.

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Southern Investment Narrative Recap

At its core, Southern Company’s investment story rests on confidence in stable regulated returns, expanding electricity demand across the Southeast, and the ability to recover large-scale capital investments through constructive regulatory decisions. The Illinois regulator’s cautious approach to Nicor’s rate hike introduces a measurable, but ultimately modest, short-term earnings impact, so the main catalysts around population growth, electrification, and future generation expansions remain unchanged, while the primary risk continues to be the company’s reliance on consistent regulatory support.

Of Southern’s recent announcements, the successful completion of a $1.75 billion Composite Units Offering in November 2025 stands out. This equity raise is directly relevant as it highlights how the company is funding its elevated five-year capital plan, which adds complexity to the earnings growth narrative, especially as regulatory environments tighten on capital recovery and rate expansion.

In contrast, investors should be mindful that while regulatory setbacks like Nicor’s partial rate approval are manageable, the growing need for equity issuances...

Read the full narrative on Southern (it's free!)

Southern's outlook anticipates $31.7 billion in revenue and $5.8 billion in earnings by 2028. This projection is based on annual revenue growth of 3.8% and an increase in earnings of $1.5 billion from the current $4.3 billion.

Uncover how Southern's forecasts yield a $99.32 fair value, a 11% upside to its current price.

Exploring Other Perspectives

Three perspectives from the Simply Wall St Community set Southern Company’s fair value between US$92.53 and US$295.18 per share. While these estimates vary widely, many community members continue to focus on regulatory support as a crucial factor shaping the company’s forward prospects.

Explore 3 other fair value estimates on Southern - why the stock might be worth over 3x more than the current price!

Build Your Own Southern Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Southern research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Southern research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Southern's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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