Investors don't generally see the utility industry as being particularly exciting, and part of the appeal of companies like Southern Company (NYSE:SO) is that they typically produce reliable results that aren't terribly volatile. Coming into Wednesday's fourth-quarter financial report, Southern Company investors were expecting to see a nice gain in revenue, but were also prepared for a year-over-year earnings hit. The utility's results reflected exactly that mix, but Southern's bottom line fell more sharply than expected.

Let's take a closer look at Southern Company to see how it did and what it sees ahead in 2017.

Frames into which solar panels will be inserted.

Framework for Southern solar project. Image source: Southern Company.

Southern Company finishes 2016 on a sluggish note

Southern Company's fourth-quarter results didn't live up to even the reined-in expectations that investors had. Revenue soared 45%, to $5.18 billion, which was far faster than the sales gains that most of those following the stock were expecting to see. However, net income attributable to the company fell by more than a quarter, to $197 million, and even after accounting for some extraordinary items, adjusted earnings of $0.24 per share missed the consensus forecast among investors by $0.09.

Looking more closely at the results, the most obvious difference at Southern Company came from the utility's new natural gas venture. The partnership with Kinder Morgan (NYSE:KMI) brought in $1.08 billion in sales, accounting for the majority of the revenue gains that the utility posted for the quarter. However, Southern also saw solid organic sales growth, with a 9% rise in retail electric revenue and a nearly 30% jump in sales from the wholesale electric segment.

Fundamentally, demand for electricity was solid during the quarter. Overall, kilowatt-hour sales jumped 6%, led by a big rise in wholesale demand. Industrial demand for electricity was weak, leading to falling usage, but a 9% rise in the residential arena reflected the favorable weather conditions that prevailed during the quarter.

From a bottom-line perspective, Southern Company's subsidiaries all faced challenges. The Mississippi Power unit lost money during the quarter, and the key Georgia Power unit suffered some of the largest earnings declines in the company. Somewhat better performance from Alabama Power and Gulf Power cushioned the blow somewhat, but Southern, nevertheless, had to deal with challenging conditions in terms of being profitable.

CEO Thomas Fanning was happy with the way that the year went. "2016 was a year of tremendous accomplishment for Southern Company," Fanning said, pointing to the acquisition of Southern Natural Gas as a way of diversifying its exposure and helping to produce another reliable stream of predictable income for the utility.

What does Southern see ahead?

Looking ahead, Southern Company is optimistic about its future. The efforts that the utility made in 2016 should produce 5% earnings-per-share growth over the long run, and Southern anticipates favorable trends in customer growth to continue. The Southeastern U.S. remains a popular destination for Americans moving from less economically prosperous regions of the nation, and accelerating new customer growth has resulted in part from rising populations in the areas that Southern serves.

Southern Company's guidance for 2017 was in line with what most investors had expected to see. The company predicts that earnings will come in between $2.90 and $3.02 per share, with the bulk of that coming from its state-regulated utility businesses. Long-term energy infrastructure contracts, however, will make up more than 10% of the company's annual earnings, and that proportion could grow over time as Southern's non-regulated businesses gain traction.

Southern Company investors seemed a bit disappointed by the earnings drop, and the stock fell slightly in pre-market trading following the announcement. Yet if the combination of regulated utilities and energy infrastructure exposure produces more reliable growth over the long run, then Southern Company should see the benefits in the form of strong fundamental performance in 2017 and beyond.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Kinder Morgan. The Motley Fool has a disclosure policy.