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Sempra Energy’s (SRE - Analyst Report) third quarter 2013 earnings per share came in at $1.19, missing the Zacks Consensus Estimate of $1.21 by 1.7%. The quarterly result was also below the year-ago adjusted profit of $1.33 by 10.5% mainly due to lower contribution from its San Diego Gas & Electric business.

Including one-time charges in the year-earlier quarter, the company reported earnings of $1.19 per share in the third quarter of 2013 versus $1.09 per share in the third quarter of 2012.

Total Revenue

Total revenue of Sempra Energy in the quarter was $2,551.0 million, up 1.8% year over year. The top-line, however, missed the Zacks Consensus Estimate by $94.0 million. The company’s utility operations generated revenues of $2,223.0 million (up 2.4% year over year), while its energy-related businesses generated $328.0 million (down 2.7%).

Segment Update

San Diego Gas & Electric (SDG&E): Quarterly earnings for San Diego Gas & Electric were $129.0 million compared with $174.0 million in the year-ago quarter. The lower number primarily reflects lower authorized rate of return for cost of capital and the loss of revenue from the San Onofre Nuclear Generating Station (SONGS).

Southern California Gas Company (SoCalGas): The segment generated earnings of $102.0 million, up from $71.0 million in third quarter 2012, backed by higher CPUC base operating margin and a lower income tax rate.

Sempra South American Utilities: The segment recorded earnings of $39.0 million, down marginally from $40.0 million in the prior-year period.
Sempra Mexico: The segment recorded earnings of $39.0 million, down from $42.0 million in third quarter 2012.

Sempra Renewables: The segment recorded earnings of $37.0 million, up considerably from $13.0 million in third quarter 2012. The improvement was backed by gains related to the contribution of assets to the 50:50 solar joint venture with Consolidated Edison Development.

Sempra Natural Gas: The segment narrowed its loss to $7.0 million from a loss of $68.0 million in the prior-year period.

Financial Update

As of Sep 30, 2013, cash and cash equivalents were $1,061.0 million, up from $475 million as of Dec 31, 2012. Long-term debt was $11,919 million (including current portion), down from $12,346 million at 2012 end. During the first nine months of 2013, cash flow from operating activities was $1,330.0 million, down from $1,688.0 million in the same period last year.


Sempra maintained its earnings per share guidance of $4.30 to $4.60 per share. The company also pointed out that its earnings for the last nine-month period were $838 million, or $3.37 per diluted share excluding the charge related to SONGS.

For 2014, the company had previously 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 take into account any major contribution from its Cameron liquefied natural gas export project in Louisiana. The project is not expected to be fully operational until the end of 2018.

Zacks Rank

Sempra Energy presently retains a short-term Zacks Rank #3 (Hold). Stocks worth considering are AGL Resources Inc. (GAS - Analyst Report), Atmos Energy Corp. (ATO - Snapshot Report) and Mdu Resources Group Inc. (MDU - Snapshot Report), all with a Zacks Rank #2 (Buy).

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