Southern Company: NYSE: SO: rating: buy. (Jefferies).

Publication: Buyside

Publication Date: 01-APR-03

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COPYRIGHT 2003 Adams Business Media

Electric Utilities

Update--January 28, 2003

Company Description:

With four million customers and nearly 37,000 megawatts of generating capacity, Atlanta-based Southern Company (NYSE: SO) is the premier super-regional energy company in the Southeast and a leading U.S. producer of electricity. Southern Company owns electric utilities in four states, a growing competitive generation company, an energy services business and a competitive retail natural gas business, as well as fiber optics and wireless communications.

Investment Thesis:

We are maintaining our Buy rating on Southern Company following the company's release of fourth-quarter earnings. Our $35.00 price target on Southern, which is based on the dividend discount model, assumes a 3.5% long-term sustainable dividend growth rate. Taking next year's estimated dividend of $1.41 divided by 4.0% (the estimated required return on Southern calculated using the capital asset pricing model less Southern's sustainable dividend growth rate of 3.5%) results in a price target of $35.00 (unchanged). Based on last...

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