With earnings season officially underway for the calendar second quarter, utilities have continued to generate largely dependable earnings even while sales growth remains lackluster.

About two-thirds of the 29 utilities in the S&P 500 have now reported earnings. The good news is that the companies that have released their results thus far have managed to grow earnings by an average of 8.8% year over year–the fourth-best showing among the 10 S&P sectors.

And earnings have surpassed analyst forecasts by an average of 7.9%, for the second-largest upside surprise among the sectors after consumer discretionary.

But with earnings from another 11 companies on deck, it’s too soon to get complacent. Beyond that, we’d feel far more at ease if earnings growth was being achieved alongside revenue growth.

Instead, utilities saw sales fall by an average of 1.7% during the second quarter, for the second consecutive quarterly decline.

There are both cyclical and secular challenges to revenue growth, including the underwhelming recovery for the former, and greater energy efficiency further accelerated by the rise of renewables for the latter–factors which have sapped electricity demand since the downturn.

That’s why our approach to stock selection emphasizes utilities that not only operate in service territories with above-average economic growth, but also have the scale and balance sheet to adapt to these changes.

The Numbers Game

The divergence between earnings and revenue is best underscored by Southern Company (NYSE: SO). The firm is the largest utility to report earnings so far, while we await results from Dominion Resources Inc. (NYSE: D) and Duke Energy Corp. (NYSE: DUK).

Southern’s earnings per share climbed 4.4% year over year, to $0.71, while sales dropped 2.9%, to $4.5 billion. Though analyst sentiment remains tepid, at best, these results were good enough to push Southern’s share price as high as $45.10, up 8.4% from the stock’s late-June low.

Residential customer growth, which helped boost sales in this category by 4.6%, and warmer weather were the key contributors to this performance.

It should be noted that adjusted earnings exclude $14 million in after-tax charges for Southern’s clean-coal plant in Kemper, Miss., a project that has been perennially behind schedule and over budget. On a GAAP basis, earnings per share came in at $0.69, or 1% higher than a year ago.

This gets to an issue that has been weighing heavily on our minds: the overreliance of so-called one-time adjustments to goose earnings. In the case of Kemper as well as the expansion of Southern’s Vogtle nuclear plant, charges from these budget busters have been a recurring feature of earnings releases, rather than one-time items.

Southern is hardly alone in this practice, but it’s worth highlighting nonetheless.

A slight majority of analysts have already reaffirmed their ratings following Southern’s earnings release. Analyst sentiment remains neutral with a strong bearish tilt, at two “buys,” 12 “holds,” and nine “sells.” The consensus 12-month target price, at $45.41, or just 1.5% above the recent share price, suggests the firm is trading near full value.

Looking ahead, analysts forecast adjusted earnings per share growing 1%, to $2.84, for full-year 2015, with sales growth of 3% per year in each of the two years thereafter.

And while Southern’s sales have declined for the past two quarters, analysts see better times ahead, with sales up 2% for full-year 2015, and then rising another 4% and 5% in 2016 and 2017, respectively.

During the earnings call, Southern CEO Tom Fanning talked about the firm’s strategy for deploying capital. He noted that the firm’s massive capital expenditures are winding down over the next three years, resulting in rising cash flow, but slowing earnings per share. To offset the latter, he sees three options: 1) share buybacks, 2) acquiring other companies, or 3) acquiring discrete assets from other companies.

With regard to the latter, he observed, “If you look at Southern Power’s performance, we certainly have exceeded our own expectations on our ability to execute asset purchases, particularly in solar and wind.”

Thereafter, Fanning sees the new environmental regulations as one source of earnings growth, since the investments necessary to be in compliance can presumably be added to rate base.

We’ve been pretty critical of Southern’s performance, but we also recognize that few income investors can turn down a steadily rising dividend (14 years of consecutive dividend increases) with a 4.9% forward yield, at least while interest rates remain at historic lows.

Just Another Upside Surprise

Though Southern’s results were decidedly mixed, the same cannot be said of Eversource Energy (NYSE: ES), which enjoyed yet another strong quarter on both the top and bottom lines.

Adjusted earnings per share jumped 27% year over year, to $0.66, beating analyst estimates by a whopping 17.4%, for the sixth consecutive upside surprise. And revenue growth was also solid, up 8%, to $1.82 billion.

The biggest driver of this performance was growth in its transmission segment, with earnings nearly doubling to $80.4 million from a year ago. Transmission assets generally earn the highest returns on equity among the various utility assets. The company is also continuing to cut costs, with a goal of reducing operating expenses by 2% to 3% this year.

Management reaffirmed its target of 6% to 8% annual earnings growth through 2018.

Following Eversource’s earnings release, the share price climbed as high as $49.99, up 10.1% from the stock’s late-June low.

This performance was also enough to flip one analyst from bearish to bullish. EVA Dimensions upped its rating to “overweight,” which is equivalent to a “buy,” from “sell.”

Overall analyst sentiment is just on the cusp of bullish, with nine “buys” and 11 “holds.” The consensus 12-month target price is $53.18, which suggests potential appreciation of 6.9% above the current share price.

For full-year 2015, analysts project earnings per share will rise 8%, to $2.86, followed by earnings growth of 7% and 6% in 2016 and 2017, respectively. Meanwhile, sales are forecast to grow 3% annually this year and then by the same amount in each of the two years thereafter.

Eversource has delivered impressive dividend growth. Its payout has grown 10.4% annually over the past five years, with a current quarterly dividend of $0.4175, or $1.67 annually, for a forward yield of 3.4%.