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Sempra Energy (SRE - Analyst Report) is set to report second quarter 2013 results on Aug 6, 2013, before the earnings bell. Last quarter it posted a 4.90% negative surprise. Sempra at the moment has a Zacks Rank #3 (Hold). Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Sempra Energy is a southern California-based energy services holding company involved in the sale, distribution, storage, and transportation of electricity and natural gas.

Sempra’s first quarter 2013 top- as well as bottom-line results missed the Zacks Consensus Estimate, in the wake of weak earnings across its business segments except the Sempra Natural Gas unit.

Again, Sempra’s businesses are capital intensive and rely significantly on long-term debt for its capital expenditures. Additionally, the company operates in the state of California, which maintains an aggressive 20%-plus renewable portfolio standard requirement. The targets are expected to further ramp up to 33% by 2020. This would entail significant investment towards renewable energy projects necessitating more funds.


Recently, Sempra lowered the high end of its 2013 guidance range to $4.30 to $4.60 per share from the earlier range of 4.30 to $4.80 per share.

For 2014, the company has set its expectation between $4.25 and $4.55 per share. For 2017, Sempra anticipates earnings of $5.10 to $5.60 per share. However, its earnings guidance through 2017 does not involve any major contribution from its Cameron liquefied natural gas export project in Louisiana. The project is not expected to be operational fully until the end of 2018.

Earnings Whispers?

Our proven model does not conclusively show that Sempra is likely to beat earnings this quarter. That is because a stock needs to have both a positive earnings Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: That is because the Most Accurate estimate stands at $1.30, while the Zacks Consensus Estimate is higher at $1.36. That is a difference of -4.41%.

Zacks #3 Rank (Hold): This combined with an ESP of -4.41% makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

MDU Resources Group Inc. (MDU - Snapshot Report) has Earnings ESP of 0.00% and carries a Zacks Rank #2 (Buy).
National Fuel Gas Company (NFG - Snapshot Report) has Earnings ESP of +1.52% and carries a Zacks Rank #2 (Buy).
Questar Corporation (STR - Analyst Report) has Earnings ESP of 0.00% and carries a Zacks Rank #2 (Buy).

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