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Sempra Energy (SRE) Up 5.2% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Sempra Energy (SRE - Free Report) . Shares have added about 5.2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Sempra Energy Beats on Q1 Earnings, Keeps '17 View

Sempra Energy’s first-quarter 2017 adjusted earnings per share (EPS) came in at $1.74, beating the Zacks Consensus Estimate of $1.59 by 9.4%. Earnings also improved 8.8% from the prior-year quarter figure.

GAAP earnings were $1.75 per share in the quarter, compared with $1.40 a year ago.

Total Revenue

In the quarter under review, total revenue was $3,031 million, up 15.6% year over year on higher contributions from both the energy-related businesses (up 85%) and utilities (10.5%). Also, total revenue surpassed the consensus mark of $2,873.9 million by 5.5%.

Segment Update

San DiegoGas & Electric (SDG&E): Quarterly earnings were $155 million, compared with the year-ago figure of $136 million. The upside was driven by a higher California Public Utilities Commission (CPUC) base margin and lower operating expenses.

Southern California Gas Company (SoCalGas): The segment registered earnings of $203 million in the first quarter of 2017, compared to the year-ago earnings of $199 million.

Sempra South American Utilities: The segment recorded earnings of $47 million in the first quarter, up from $38 million in the prior-year quarter. The upside can be attributed to higher operating earnings in Peru.

Sempra Mexico: The segment recorded earnings of $48 million, up from $18 million recorded in the prior-year quarter. The earnings improvement was driven primarily by the deferred tax expense of $24 million that the company incurred in 2016, on account of the planned sale of the Termoeléctrica de Mexicali (TdM) power plant.

Sempra Renewables: The segment recorded quarterly earnings of $11 million, down from $14 million in the prior-year quarter.

Sempra LNG & Midstream: The segment reported earnings of $1 million, against the year-ago quarter’s loss of $32 million.

Financial Update

As of Mar 31, 2017, Sempra Energy’s cash and cash equivalents were $290 million, compared with $349 million as of Dec 31, 2016.

Long-term debt was $14,409 million as of Mar 31, 2017, compared with $14,429 million at 2016 end.

Cash flow from operating activities was $1,004 million at the end of first-quarter 2017, up from $626 million at the end of the prior year quarter.

In the first quarter, the company’s capital expenditures and investments were $1,051 million compared with $1,001 million in the prior-year period.

Guidance

Sempra Energy reaffirmed its 2017 earnings per share guidance in the band of $4.85–$5.25.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Sempra Energy Price and Consensus

 

VGM Scores

At this time, the stock has a nice Growth Score of 'B', while Momentum is doing a bit better with a 'A'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for momentum investors than value investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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