Home > Comparison > Utilities > NEE vs SO
The strategic rivalry between NextEra Energy, Inc. and The Southern Company shapes the Utilities sector’s future. NextEra leads as an innovation-driven clean energy powerhouse, while Southern Company operates a diversified regulated electric and gas utility model. This clash highlights a choice between aggressive renewable growth and steady multi-commodity utility income. This analysis will identify which company presents the superior risk-adjusted profile for a balanced, long-term portfolio.
Table of contents
Companies Overview
NextEra Energy and The Southern Company stand as key players in the regulated electric utility sector in the US.
NextEra Energy, Inc.: Leader in Clean Energy Solutions
NextEra Energy dominates as a regulated electric utility in North America. It generates revenue primarily through electricity sales from wind, solar, nuclear, coal, and natural gas facilities. In 2021, it focused strategically on expanding renewable generation and battery storage projects, reinforcing its competitive edge in clean energy.
The Southern Company: Integrated Gas and Electric Services
The Southern Company operates as a diversified utility, blending electricity generation with extensive natural gas distribution. Its revenue stems from gas pipeline investments, wholesale gas services, and electricity sales. In 2021, it prioritized managing a broad asset base including renewables, fossil fuels, and natural gas infrastructure to strengthen its utility footprint.
Strategic Collision: Similarities & Divergences
Both firms emphasize regulated utilities but differ in approach. NextEra pursues a renewable-focused growth strategy, while Southern Company maintains a broader energy mix including gas pipelines. Their battleground is clean energy adoption versus integrated gas services. Investors face distinct profiles: NextEra offers growth via green innovation, Southern Company provides stability through diversified energy assets.
Income Statement Comparison
The following data dissects the core profitability and scalability of both corporate engines to reveal who dominates the bottom line:
| Metric | NextEra Energy, Inc. (NEE) | The Southern Company (SO) |
|---|---|---|
| Revenue | 27.5B | 26.7B |
| Cost of Revenue | 10.2B | 13.4B |
| Operating Expenses | 8.98B | 6.27B |
| Gross Profit | 17.3B | 13.3B |
| EBITDA | 16.2B | 13.2B |
| EBIT | 9.1B | 7.97B |
| Interest Expense | 4.57B | 2.74B |
| Net Income | 6.83B | 4.40B |
| EPS | 3.31 | 4.02 |
| Fiscal Year | 2025 | 2024 |
Income Statement Analysis: The Bottom-Line Duel
This comparison reveals how efficiently NextEra Energy and The Southern Company convert revenue into profits and sustain margin strength amid market pressures.
NextEra Energy, Inc. Analysis
NextEra Energy’s revenue surged from 17B in 2021 to 27.5B in 2025, driving net income nearly doubling from 3.6B to 6.8B. The company maintains robust gross margins above 60%, reflecting strong pricing power and cost control. Despite a slight net margin dip recently, its 33% EBIT margin in 2025 underscores operational efficiency and momentum.
The Southern Company Analysis
Southern Company grew revenue from 20B in 2020 to 26.7B in 2024, with net income climbing from 3.1B to 4.4B. Gross margins hover near 50%, lower than NextEra’s, but still healthy. The firm improved EBIT margins to nearly 30% in 2024 and posted steady EPS growth, signaling solid operational progress and margin expansion.
Margin Dominance vs. Steady Growth
NextEra Energy leads with higher margins and stronger net income growth, nearly doubling profits over five years. Southern Company delivers steadier revenue and earnings growth but with thinner margins. Investors seeking margin resilience and accelerating profitability may find NextEra’s profile more compelling.
Financial Ratios Comparison
These vital ratios act as a diagnostic tool to expose the underlying fiscal health, valuation premiums, and capital efficiency of the companies compared below:
| Ratios | NextEra Energy, Inc. (NEE) | The Southern Company (SO) |
|---|---|---|
| ROE | 12.5% | 13.3% |
| ROIC | 4.2% | 4.3% |
| P/E | 24.5 | 20.5 |
| P/B | 3.1 | 2.7 |
| Current Ratio | 0.60 | 0.67 |
| Quick Ratio | 0.49 | 0.46 |
| D/E | 1.75 | 2.00 |
| Debt-to-Assets | 45.0% | 45.7% |
| Interest Coverage | 1.81 | 2.58 |
| Asset Turnover | 0.13 | 0.18 |
| Fixed Asset Turnover | 0.18 | 0.25 |
| Payout Ratio | 68.5% | 67.1% |
| Dividend Yield | 2.8% | 3.3% |
| Fiscal Year | 2025 | 2024 |
Efficiency & Valuation Duel: The Vital Signs
Financial ratios serve as a company’s DNA, exposing hidden risks and operational strengths that shape investor decisions.
NextEra Energy, Inc.
NextEra Energy delivers a solid 12.5% ROE, signaling moderate shareholder profitability. Its net margin stands out favorably at 24.87%. The stock trades at a neutral P/E of 24.5 but carries an unfavorable price-to-book of 3.07. Dividend yield at 2.79% supports shareholder returns amid mixed capital efficiency metrics.
The Southern Company
Southern Company posts a slightly higher ROE of 13.25% with a respectable net margin of 16.47%. Its valuation is neutral, marked by a P/E of 20.5 and a more attractive price-to-book of 2.72. Dividend yield is favorable at 3.27%, reflecting a stronger income focus though operational turnover ratios remain weak.
Balanced Risk vs. Premium Valuation
Southern Company offers a slightly better balance of valuation and shareholder income through a lower P/E and higher dividend yield. NextEra shows stronger margin efficiency but struggles with capital turnover and leverage. Income-oriented investors may prefer Southern’s profile, while growth-focused investors might lean toward NextEra’s operational edge.
Which one offers the Superior Shareholder Reward?
I compare NextEra Energy (NEE) and The Southern Company (SO) on dividends and buybacks. NEE yields about 2.8%, with a high payout ratio near 68%, covering dividends comfortably from free cash flow in recent years. SO offers a higher yield at around 3.3%, but its payout ratio hovers near 67%, with weaker free cash flow coverage. Both companies maintain steady buyback programs; however, NEE’s reinvestment in growth and capex signals a more balanced capital allocation. SO’s higher leverage and less consistent free cash flow raise sustainability concerns. I conclude NEE offers a superior total return profile for 2026 investors, blending yield, buybacks, and sustainable growth.
Comparative Score Analysis: The Strategic Profile
The radar chart reveals the fundamental DNA and trade-offs of NextEra Energy, Inc. and The Southern Company:
NextEra shows strength in ROE and ROA with favorable scores of 4 each, indicating efficient profit generation and asset use. Southern matches NextEra’s ROE but lags slightly in ROA at 3. Southern scores better on discounted cash flow (3 vs. 1), suggesting a more attractive valuation forecast. NextEra’s moderate debt-to-equity score (2) signals balanced leverage, outperforming Southern’s weaker score of 1. Both firms share moderate valuation scores (PE and PB at 2). Overall, NextEra has a more balanced financial profile, while Southern relies more on its DCF advantage.
Bankruptcy Risk: Solvency Showdown
NextEra’s Altman Z-Score of 1.20 versus Southern’s 0.99 places both in the distress zone, implying elevated bankruptcy risk amid current market pressures:
This signals caution. Historically in utilities, prolonged distress scores warn of liquidity and solvency challenges, urging close monitoring.
Financial Health: Quality of Operations
NextEra’s Piotroski F-Score of 7 outperforms Southern’s 6, indicating stronger internal financial health and operational quality:
While both are solid, Southern’s lower score suggests emerging red flags in profitability or liquidity metrics, meriting investor vigilance.
How are the two companies positioned?
This section dissects the operational DNA of NEE and SO by comparing their revenue distribution by segment and internal strengths and weaknesses. The objective is to confront their economic moats to identify which business model offers the most resilient and sustainable competitive advantage today.
Revenue Segmentation: The Strategic Mix
This visual comparison dissects how NextEra Energy, Inc. and The Southern Company diversify their income streams and where their primary sector bets lie:
NextEra Energy anchors revenue in two key segments: $17B from Florida Power & Light and $7.5B from NEER, showing moderate diversification. Southern Company pivots around a dominant $22.9B Electric Utilities segment, with $4.5B from Southern Company Gas. Southern’s heavy reliance on electric utility revenues signals infrastructure dominance but carries concentration risk. NextEra’s balanced mix underscores strategic ecosystem lock-in across regulated and renewable assets.
Strengths and Weaknesses Comparison
This table compares the Strengths and Weaknesses of NextEra Energy, Inc. and The Southern Company:
NextEra Energy, Inc. Strengths
- Higher net margin at 24.87% supports strong profitability
- Favorable WACC at 6.52% indicates efficient capital cost
- Significant revenue from diversified segments including Florida Power & Light
The Southern Company Strengths
- Favorable net margin at 16.47% supports profitability
- Lower WACC at 5.03% reduces capital costs
- Diversified gas and electric operations with substantial revenues
NextEra Energy, Inc. Weaknesses
- Low current and quick ratios below 1 signal liquidity concerns
- High debt-to-equity at 1.75 and weak interest coverage at 1.99 raise solvency risks
- ROIC below WACC at 4.23% suggests value destruction
The Southern Company Weaknesses
- Low liquidity indicated by current and quick ratios below 1
- Higher debt-to-equity at 2.0 and only neutral interest coverage at 2.91
- ROIC below WACC at 4.25% signals inefficient capital use
NextEra leads on profitability and capital cost efficiency but struggles with liquidity and capital returns. Southern Company shows more balanced financial health but also faces capital efficiency and liquidity challenges. Both must address capital allocation and leverage to improve financial resilience.
The Moat Duel: Analyzing Competitive Defensibility
A structural moat is the only reliable barrier protecting long-term profits from relentless competitive pressure and market erosion:
NextEra Energy, Inc.: Innovation-Driven Renewable Moat
NextEra leverages intangible assets and cost advantages in renewable energy, reflected in stable 33% EBIT margins and 60% revenue growth since 2021. New battery storage projects could deepen this moat in 2026.
The Southern Company: Infrastructure-Heavy Regulated Moat
Southern Company’s moat stems from extensive regulated utility infrastructure and gas pipeline investments, generating steady margins near 30%. Its legacy assets contrast with NextEra’s innovation edge but offer reliable cash flow amid energy transitions.
Innovation Leadership vs. Regulated Stability
NextEra’s rapidly growing ROIC trend and heavy investment in clean tech suggest a wider moat. Southern’s durable but slower ROIC growth reflects a narrower moat anchored in regulation. NextEra appears better positioned to defend and expand market share through innovation.
Which stock offers better returns?
The past year saw significant gains for both stocks, with NextEra Energy accelerating its upward momentum, while The Southern Company’s growth slowed despite rising trading volumes.
Trend Comparison
NextEra Energy’s stock rose 47.84% over 12 months, showing a bullish trend with accelerating momentum and a high of 88.82. Volatility measured by a 6.34 standard deviation is moderate.
The Southern Company increased 30.45% in the same period, also bullish but with decelerating gains. It reached a higher peak of 98.29 and exhibited slightly more volatility at 6.55 standard deviation.
NextEra Energy outperformed The Southern Company by a wide margin, delivering superior market returns and stronger trend acceleration over the past year.
Target Prices
Analysts present a moderate upside potential for both NextEra Energy and The Southern Company, reflecting stable sector fundamentals.
| Company | Target Low | Target High | Consensus |
|---|---|---|---|
| NextEra Energy, Inc. | 84 | 104 | 93.09 |
| The Southern Company | 76 | 105 | 92.5 |
NextEra Energy’s target consensus sits about 5% above its current price of 88.82, signaling cautious optimism. The Southern Company’s target consensus also exceeds its current price of 90.13, suggesting analysts expect modest appreciation.
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How do institutions grade them?
NextEra Energy, Inc. Grades
The following table summarizes recent institutional grades for NextEra Energy, Inc.:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Mizuho | Maintain | Neutral | 2026-01-28 |
| Argus Research | Maintain | Buy | 2026-01-28 |
| BMO Capital | Maintain | Outperform | 2026-01-27 |
| Wells Fargo | Maintain | Overweight | 2026-01-20 |
| Barclays | Maintain | Equal Weight | 2026-01-15 |
| Jefferies | Maintain | Hold | 2025-12-31 |
| UBS | Maintain | Buy | 2025-12-17 |
| JP Morgan | Maintain | Overweight | 2025-12-11 |
| BMO Capital | Maintain | Outperform | 2025-12-10 |
| UBS | Maintain | Buy | 2025-12-10 |
The Southern Company Grades
The following table summarizes recent institutional grades for The Southern Company:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Wells Fargo | Downgrade | Underweight | 2026-01-20 |
| Barclays | Maintain | Equal Weight | 2026-01-15 |
| UBS | Maintain | Neutral | 2025-12-17 |
| JP Morgan | Maintain | Neutral | 2025-12-15 |
| Jefferies | Maintain | Neutral | 2025-12-15 |
| Keybanc | Maintain | Underweight | 2025-12-12 |
| RBC Capital | Maintain | Sector Perform | 2025-12-12 |
| Mizuho | Maintain | Neutral | 2025-12-11 |
| Barclays | Maintain | Equal Weight | 2025-11-20 |
| Jefferies | Downgrade | Neutral | 2025-11-05 |
Which company has the best grades?
NextEra Energy has consistently stronger ratings, including multiple Buy and Outperform grades. The Southern Company shows more Neutral and Underweight ratings. Investors may view NextEra as the more favored option by analysts.
Risks specific to each company
The following categories identify critical pressure points and systemic threats facing NextEra Energy and The Southern Company in the 2026 market environment:
1. Market & Competition
NextEra Energy, Inc.
- Strong clean energy growth but faces intense competition in renewables.
The Southern Company
- Diverse generation mix but slower renewable expansion compared to peers.
2. Capital Structure & Debt
NextEra Energy, Inc.
- High debt-to-equity ratio (1.75) with weak interest coverage (1.99x) raises financial risk.
The Southern Company
- Even higher leverage (2.0) but better interest coverage (2.91x), still a concern.
3. Stock Volatility
NextEra Energy, Inc.
- Beta of 0.76 suggests moderate sensitivity to market swings.
The Southern Company
- Lower beta of 0.45 indicates less price volatility, offering stability.
4. Regulatory & Legal
NextEra Energy, Inc.
- Regulatory environment favors renewables, but policy shifts could impact returns.
The Southern Company
- Exposure to multi-state regulations increases complexity and legal risk.
5. Supply Chain & Operations
NextEra Energy, Inc.
- Complex asset base with solar, wind, nuclear creates operational execution challenges.
The Southern Company
- Large natural gas pipeline network faces operational and maintenance risks.
6. ESG & Climate Transition
NextEra Energy, Inc.
- Leading in clean energy investments, but transition costs pressure margins.
The Southern Company
- Transition lagging peers; fossil fuel assets pose stranded asset risk.
7. Geopolitical Exposure
NextEra Energy, Inc.
- Primarily domestic US exposure limits geopolitical risk.
The Southern Company
- Similar US focus, but multi-state regulatory variance adds complexity.
Which company shows a better risk-adjusted profile?
NextEra’s most impactful risk is its stretched capital structure combined with weak liquidity ratios, threatening financial flexibility. Southern’s biggest risk lies in its higher leverage and less efficient asset use, raising bankruptcy concerns. Despite both in distress zones by Altman Z-Score, Southern’s slightly better interest coverage and lower volatility provide a marginally better risk-adjusted profile. Notably, NextEra’s low current ratio (0.6) signals acute short-term liquidity issues, intensifying my caution.
Final Verdict: Which stock to choose?
NextEra Energy’s superpower lies in its impressive growth trajectory and commanding market presence as a clean energy leader. It drives strong profitability despite a heavy capital structure, yet I remain cautious about its stretched liquidity and elevated leverage. This name fits well in an Aggressive Growth portfolio focused on future energy trends.
The Southern Company benefits from a dependable utility moat, delivering consistent cash flow and a more conservative financial profile. Its modest valuation and stable dividend yield offer relative safety compared to NextEra’s higher volatility. It suits a GARP (Growth at a Reasonable Price) portfolio seeking steady income with moderate growth.
If you prioritize rapid expansion and strong market momentum, NextEra Energy outshines with its growth potential despite financial risks. However, if you seek better stability and a balanced risk-return profile, Southern Company offers superior defensive qualities and income consistency. Each appeals to distinct investor avatars navigating the evolving energy landscape.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of NextEra Energy, Inc. and The Southern Company to enhance your investment decisions:
