What happened

Shares of utility stock Southern Company (NYSE:SO) declined 10.3% in the month of March, according to data provided by S&P Global Market Intelligence. The usual investor mindset is that defensive stocks like utilities should be stable regardless of the condition of the overall stock market, but it's tough for any company to escape the wrath of an unprecedented event like the COVID-19 pandemic.

The stock, however, has swiftly reversed course and gained almost 12% in April so far, as of this writing.

So what

Southern Company isn't immune from the COVID-19 pandemic effect. The biggest threat is the widespread lockdown of large power consumers, or commercial and industrial establishments like shops, malls, and offices. A prolonged slowdown in manufacturing activity can hit demand for electricity and gas.

A stock market trading window with up and down arrows.

Image source: Getty Images.

That's undeniably the primary reason why the stock lost weight last month. Because utility stocks also typically carry high levels of debt, any reduction in demand and cash flow also raises concerns about debt repayment and dividend capabilities. Investors have also been worried about any potential impact of the pandemic on Southern Company's Vogtle nuclear construction project.

The stock, however, got a lift later in March when the government announced a $2 trillion coronavirus stimulus package, lifting investor hopes of minimal damage to key sectors.

Now what

Southern's April 1 regulatory filing, though, might disappoint investors, as management said the COVID-19 effect "could disrupt or delay construction, testing, supervisory and support activities at Plant Vogtle Units 3 and 4," which could mean project time and cost overruns for the utility.

On a positive note, Southern Company's electric utility subsidiary Georgia Power has applied for a reduction in its fuel rates by 16% beginning June 1 with the regulatory body Georgia Public Service Commission. That means Georgia Power's natural gas costs are declining as it's making better use of cleaner and renewable energy sources like solar, wind, and nuclear. Georgia Power was the largest contributor to Southern Company's total operating revenue and operating income in 2019.

The stock's rally in April so far, though, suggests investors are more than willing to buy such traditionally "recession-proof stocks," given the rising global coronavirus uncertainty.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.