The markets have seen a significant sell-off, with the S&P 500 declining by about 23% since March 9th, driven by the growing number of Coronavirus cases in countries outside of China, which is causing mounting concerns that the world could be headed into a recession. Southern Company (NYSE: SO), the second-largest utility company in the U.S. in terms of customers, saw its stock price fall by 31% over the last 10 trading sessions, (between March 9, and March 20), and by -34% since early February, underperforming the broader markets. This is at odds with the company’s performance over the 2008 crisis when it outperformed the market through the downturn. This could be partly due to Southern’s growing debt load (long-term debt has more than doubled since the 2009 crisis). That said, utility stocks are generally viewed as good defensive bets through such crises. While industrial demand for power could soften for the company, this could be offset by an increase in residential consumption. In our analysis 2007-08 vs. 2020 Crisis Comparison: How Did Southern Stock Fare Compared with S&P 500? we take a look at how the company’s stock reacted to the economic crisis of 2008 and compare its performance with the S&P 500. Parts of the analysis are summarized below.
Southern Performance During 2020 Coronavirus/Oil Price War Crisis
- Southern’s stock declined by 31% between Friday, March 9, 2020, and March 20, 2020, and the stock is down by 34% since February 1, after the WHO declared a global health emergency.
- The S&P 500 declined by 22.5% between March 9, 2020, and March 20, 2020, and it has fallen by 28.5% since February 1.
- In comparison, Duke Energy stock has declined by about 31% and NextEra Energy stock is down by 29.5% since March 9th.
Southern Stock Performance Over 2007-08 Financial Crisis
- SO stock declined from levels of around $21 in October 2007 (the pre-crisis peak) to $18 in March 2009 (as the markets bottomed out) and recovered to levels of about $21 in early 2010.
- Through the crisis, SO stock declined over 13% from its approximate pre-crisis peak. This marked a decline that was significantly below the S&P, which fell by as much as 51%.
- SO stock saw a reasonable recovery from its lows, rising by over 15% between March 2009 and January 2010. The growth was much lower than the S&P, which rose by about 48% over the same period.
- Southern stock has underperformed the broader market through the Coronavirus and oil price war crisis, unlike the 2008 crisis when it remained much more resilient.
- It is likely that the current price decline could be an overreaction, as utility companies such as Southern typically see their earnings hold up better compared to the broader markets through economic downturns.
For more detailed charts and a timeline of the 2008 and 2020 crisis for different stocks, view our interactive dashboard analyses on coronavirus.